IOI takes top spot on M'sian bourse

Surging crude palm oil prices have propelled its rise

By PAULINE NG
IN KUALA LUMPUR PROPELLED by surging crude palm oil prices and expectations it would surpass last year's record profits, IOI Corporation yesterday leapt to the top spot on the local bourse, pushing Malayan Banking (Maybank), to second position.

Pushing ahead: High prices for crude palm oil, currently around RM2,900 per tonne, have helped IOI make gains of over 50 per cent in the space of three months At yesterday's close of RM7.90 after it gained 40 sen, the plantations giant's market capitalisation of RM47.4 billion (S$20.6 billion) established it as the country's most valuable listed entity. In comparison, Maybank is currently worth about RM43 billion.

IOI Corp's market rise is remarkable, given the top-most positions are nearly always occupied by government-linked entities.

Still, Malaysia's most efficient plantation player is likely to hang on to the top honour for a month - or at least until Synergy Drive comes into being. The government-linked plantations corporation combining three former plantations groups - Sime Darby, Kumpulan Guthrie and Golden Hope - is scheduled to list on Bursa Malaysia's main board at the end of November. Analysts have estimated that Synergy's value upon listing could exceed RM70 billion, which would make it the indisputable exchange leader.

For now the limelight is on IOI Corp, which despite its gains of over 50 per cent in the space of thee months - some half of it in the past month - is still a compelling pull for some.

High prices for crude palm oil - currently around RM2,900 per tonne - have helped, and IOI Corp executive chairman Lee Shin Cheng has indicated that analysts' consensus estimates of a RM1.8 billion net profit for the fiscal year ending in June 2008 will be surpassed.

Last year, IOI's then record profit of nearly RM1.5 billion was achieved at a time of lower prices for crude palm oil, know as CPO. Speaking after the company's annual general meeting on Monday, Mr Lee said CPO prices could well reach RM3,000 per tonne soon.

But stockbroking firms such as Hwang-DBSVickers are more excited about its plans to acquire other plantation companies as potential acquisitions could be 'value accretive' to the stock. Others believe its shares are already fairly valued.

'While sector fundamentals remain positive and we expect CPO prices to stay firm, upside from here looks increasingly less significant, and the impact will also be muted by the expected stronger ringgit,' JP Morgan's Simone Yeoh said in a client note.

Meanwhile, companies such as Unico Desa Plantations are riding on IOI Corp's professed interest in them. Unico is currently embroiled in a shareholder tussle, but its shares jumped 22 sen to RM1.22 after Mr Lee said IOI Corp was contemplating taking over the company if the terms were right.

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