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.

Link here

Offer to sell 57% in Unico-Desa

30 Oct 2007

PETALING JAYA: Unico-Desa Plantations Bhd's major shareholders have offered to sell a 57% stake in the oil palm plantation group.

Under listing requirements, the disposal would trigger a mandatory general offer for all shares in Unico-Desa should a single party take up the entire chunk of shares.

Consequently, merchant bankers said there was a likelihood of Unico-Desa being taken private in such an event.

The 57% stake are from three parties – Unico Holdings Bhd, Teoh Hock Chai and Dr Yeong Yue Chai. Teoh and Yeong are directors of Unico Holdings as well as Unico-Desa.

News of Unico-Desa shares being offered for sale en bloc appeared to have given the company's share price a lift yesterday. The counter jumped to a record high of 96.5 sen before finishing up 2.5 sen at 94 sen. The stock has gained 40.1 sen, or 74%, year-to-date. The company's market capitalisation stood at about RM830mil yesterday.

IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng said the group would consider the Unico-Desa offer and also look for bigger plantation companies to acquire.

CIMB Research said that with Unico-Desa's oil palm plantations located close to the estates of other bigger players such as IOI Corp and Asiatic Development Bhd, the big planters would be keen to acquire the majority stake in Unico-Desa “if the price is right''.

Unico-Desa has been hogging the limelight in the last two months over a dispute involving its parent company Unico Holdings' 29.3% shareholding in the oil palm plantation group.

The bone of contention is opposition by former director Tan Kai Hee, who was not re-elected at the AGM last month, to the company's plan to undertake a capital reduction exercise, which would be followed by the distribution of Unico-Desa shares to some 22,200 Unico shareholders.

Link here

IOI sees record profit

30 Oct 2007

By KATHY FONG

PUTRAJAYA: IOI Corp Bhd, which is in the midst of finalising an asset acquisition, expects to post another record net profit for the current financial year ending June 30, 2008 (FY08) of more than RM1.8bil, said executive chairman Tan Sri Lee Shin Cheng.

Lee said it had sold forward half of the crop production volume at the average price of RM2,500 per tonne, compared with RM1,700 per tonne in FY07.

“The RM800 jump in CPO (crude palm oil) price per tonne should be an indicator that the group would not only sustain its earnings growth, but also improve further,” he said.

“FY07 was a record (profit) year. This financial year (FY08) will be another record,'' Lee added.

IOI Corp posted a net profit of RM1.48bil in FY07, up 79% from RM829mil in FY06. Revenue grew to RM8.95bil from RM6.1bil previously. The group's crop production for FY07 was 3.69 million tonnes.

IOI Propeties Chairman Tan Sri Lee reply to media after chaired AGM and EGM in Putrajaya on Monday

Lee said it would not be a problem for CPO price to reach RM3,000 a tonne.

“Whatever goes up must come down,” Lee said when asked if the uptrend in CPO price was sustainable at current levels.

He expected the correction of CPO prices would not be too drastic in the event of one due to the growing demand for palm-based products worldwide.

“CPO is no longer a commodity. It is an industrial product. Exports to the US have doubled because of the trans fatty acid issue,” he said.

Bullish CPO futures which surged to a record high of RM2,910 per tonne yesterday gave IOI Corp share price a timely lift to boost the stock to a historical high of RM7.50, a rise of 35 sen.

On the its expansion plans, Lee said the oil palm plantation group was currently in talks to acquire a plantation company. “It looks like it (the acquisition) will be completed in FY08,” he told a press conference after the AGMs of IOI Corp Bhd and IOI Properties Bhd yesterday.

He also said the group would consider the 57% stake in Unico-Desa Plantations Bhd offered for sale by Unico Holdings Bhd and two major shareholders.

“I would get my board members to look into Unico-Desa,” Lee said, but stressed that IOI Corp would not launch any “unfriendly takeover.”

Given an annual cash flow of RM2bil, Lee said financing was not an issue for the IOI group.

“We've got the appetite (for asset acquisition). We are looking for bigger companies than Unico-Desa,” he added.

On the group's property division, Lee said IOI Property wanted to build more commercial properties to pave the way for it to set up a real estate investment trust (REIT).

“We only have about one million sq ft of rentable area in IOI Mall, which is too little. We intend to raise it by 30% to 40% before we could set up a REIT,” he added.

Link here

Lessons from IOI for Synergy Drive

Published October 29, 2007

MALAYSIA INSIGHT

The corporation's solid management is worthy of emulation by the new behemoth

By S JAYASANKARAN
KL CORRESPONDENT

LAST Friday, IOI Corporation - a plantations, oleochemicals and property conglomerate - became the second largest company on Bursa Malaysia (BM), the Kuala Lumpur stock exchange, with a market capitalisation of RM41.4 billion (S$18 billion).

Malayan Banking (Maybank) remains tops at RM44 billion, while IOI Corp pushed state-owned utility Tenaga National to third spot at RM40.3 billion. The rest of Malaysia's corporate grandees are familiar names: Public Bank (RM38 billion), Malaysian International Shipping Corporation (RM37.1 billion), Bumiputra-Commerce Holdings (RM36.4 billion) and Telekom Malaysia (RM35 billion).

For IOI Corp to come this far is a tremendous feat; it was nowhere near such exalted heights, say, twelve years ago.

How it did so is what a soon-to-be-created entity called Synergy Drive might want to research.

To be sure, high palm oil prices was the immediate trigger that pushed IOI Corp shares up last Friday: the benchmark crude palm oil futures contract hit RM2,776 a tonne and seems poised to test the record RM2,800 mark soon.

But more importantly, IOI is superbly managed. On almost all counts, it boasts better efficiencies and superior returns on its assets - whether in plantations, property, oleochemicals manufacturing, even hotel management. Stripped of the rhetoric, it has what securities house CLSA calls 'a solid management track record'.

The company is now the world's largest producer of oleochemicals from palm oil - courtesy of acquisitions of Dutch and Indian refineries this year and last - and made a net profit of RM1.48 billion on RM8 billion of sales for its 2007 financial year against consensus earnings forecasts of RM1.3 billion odd. And it remains a top pick for institutional investors.

Some time in November, Synergy Drive will be listed. It represents a work in progress that had its seeds in a plan presented to Prime Minister Abdullah Ahmad Badawi by businessman Chua Ma Yu in 2003. His plan was simple: take six plantation firms owned by the state agency and merge them to create the world's largest listed oil palm company with 5 per cent of global palm oil supply, over 600,000 hectares of land and, conceivably, Malaysia's biggest firm in terms of value. Investment bank CIMB took Mr Chua's idea and ran with the ball, promoting the merger last year and the result next month will be Synergy Drive, which is likely to be renamed Sime Darby.

Synergy is likely to become the biggest firm in the country upon listing: its sheer size and euphoria over high palm oil prices will ensure that outcome. Indeed, preliminary estimates of Synergy's market capitalisation are anything between RM60 billion and RM70 billion. But can it stay that way?

Given the cyclical nature of the oil palm business, that is unlikely. Even so, Synergy Drive can do a whole lot more. The whole idea behind the merger plan was to increase productivity in Malaysia's palm oil industry, to increase the country's competitiveness to face challenges thrown up by new Asian investment magnets, particularly China and India.

For the longest time, the companies that make up Synergy - from Sime Darby to Golden Hope - have consistently underperformed companies like IOI Corporation. On every conceivable performance index - from yield per hectare to return on assets - the state-owned plantation companies have lost out to IOI.

If they could get even close, the results would be astonishing. Here's one statistic to chew on: Last year, IOI produced 806,627 tonnes of crude palm oil while Synergy's combined output was 2.1 million tonnes. If it does get its act together a la IOI, its production will be a whole lot higher. And Malaysia would truly have a world-class brand.

Link here

Mild boost only from IOI’s Indonesian venture

Link here

20 Sept 2007

IOI Corporation Bhd’s acquisition of several Indonesia-based oil palm plantation firms for nearly US$90 million (RM315 million), would boost its bottomline by only RM3.3 million to RM10.5 million per annum over the next three years, said Aseambankers Equity Research.

“Nevertheless, we raised our FY08 and F09 earnings forecast by 4.7% and 3.1% respectively to reflect the higher average CPO price assumption for FY08 and FY09,” it said.

It forecast CPO prices to rise from RM2,250 per tonne to RM2,350 in FY08 and for FY09, it expected the price to increase from RM2,150 to RM2,200 per tonne, respectively.

Aseambankers Research said it maintained its “fully valued” call, but raised its target price to RM4.80 (previously RM4.70) based on 18 times FY09 fully-diluted earnings per share (EPS).

On Tuesday, IOI Corp said that it was acquiring several Indonesia-based oil palm plantation companies as part of the group’s strategy to grow its core palm oil business under appropriate conditions.

The company had inked an agreement to acquire a 33% stake in PT Bumitama Gunajaya Agro which has a total planted area of 35,300ha and unplanted land of 64,500ha, together with three palm oil mills.

It also signed an agreement to acquire a 67% stake in several companies with total land available for planting of 52,700ha (significantly reduced from the previously reported 128,000ha as the remaining land was unsuitable for planting after due diligence).

The acquisition will be funded by existing cash and borrowings, and targeted for completion by end-2007.

However, Aseambankers Research said that of the 68,000ha of effective interest by IOI Corp, 11,630ha had been planted of which only 4,648ha are young mature (against IOI Corp’s existing 140,000ha mature plantation; minimal).

It estimated the Indonesian venture is unlikely to make any meaningful contribution to IOI at least over the next four years.

“We understand that IOI Corp has targeted to open 10,000ha of new land per annum at US$3,000 development cost over a three year period. But judging from IOI Corp’s lack of local experience, we believe the actual planting in the initial years could be significantly lower based on experiences shared by other Malaysian planters,” it said.

IOI Corp buys oil palm firms for RM289m

Link here

19 Sept 2007

KUALA LUMPUR: IOI Corporation Bhd (IOI Corp) is acquiring several Indonesia-based oil palm plantation companies for a total of nearly US$90 million (RM289 million) as part of the group’s strategy to grow its core palm oil business under appropriate conditions.

It had entered into agreements to acquire Singapore-based investment holding companies Lynwood Capital Resources Pte Ltd and Oakridge Investments Pte Ltd from Ivygate International Ltd and Red Canyon Enterprise Ltd, and Oleander Capital Resources Pte Ltd from Goldharvest Group Holdings Ltd, for US$62.63 million and US$20.3 million respectively.

The deal will also see IOI Corp owning 33% of PT Bumitama Gunajaya Agro (BGA), and 67% each in PT Agro Mandiri Sejahtera, PT Ketapang Sawit Lestari, PT Bumi Sawit Sejahtera, PT Kalimantan Prima Agro Mandiri, PT Berkat Nabati Sejahtera and PT Sukeses Karya Sawit. Under the agreement, IOI Corp will repay US$9.6 million on behalf of BGA, owing to Ivygate and Red Canyon.

The proposed acquisition, which will be completed in the last quarter of 2007, will be funded by existing cash reserves and borrowings.

In a statement released yesterday, it said BGA has a total planted area of about 35,300ha and unplanted land of about 64,500ha, as well as three oil mills. It also oversees a plasma scheme of about 21,800ha.

The second deal would provide a 52,700ha piece of land for planting excluding areas allocated for plasma schemes.

It said IOI Corp would provide plantation management, agronomy and related technical support services to achieve better efficiency and cost effectiveness, while the remaining shareholders would be responsible for human resource and regulatory matters, which included the procurement of issuance of relevant land titles.

It said expanding the plantation business in the country had became more difficult due to scarcity of plantation land, adding that Indonesia’s proximity to the country was ideal for the group’s plantation expansion overseas.

Values boom in parts of corridor

Full story here

17 July 2006

In Pusat Bandar Puchong, the prices of double-storey terraced houses have appreciated substantially since the project kicked off in 1994. The smallest 18’ x 65’ units which were priced at RM117,000 have appreciated to RM220,000 today while the 20’ x 70’ units are changing hands for RM300,000 from the launch price of RM150,000.

Land value, especially those surrounding Putrajaya, was reported to have appreciated from RM1.50 psf before the development of Putrajaya to RM50 psf now.

According to Putrajaya Holdings Sdn Bhd chief executive officer Azlan Abdul Karim, Putrajaya and Cyberjaya offered the most growth potential. Putrajaya in particular, has invested in excellent infrastructure, amenities and architecture. This will pay off in the future as the city matures.

“In terms of concept planning, Putrajaya is a showcase city and the architectural and planning efforts made throughout the city ensures that it will be a tourist attraction to rival international cities in years to come,” Azlan told StarBiz.

IOI Properties Bhd director Datuk David Tan said with the growing affluence of the population in the corridor, the types and prices of properties being developed here have reached the levels of those in established neighbourhoods in Petaling Jaya and Kuala Lumpur.

“With these, developers are compelled to meet expectations on quality of workmanship and customer service,” he added.

IOI is one of the property companies that had made it big in Puchong in the 1990s through its 930-acre Bandar Puchong Jaya followed by the 930-acre Bandar Puteri Puchong. Tan said the company still believed in the corridor’s potential and had lined up a new township on 550 acres at the entrance to Cyberjaya.

“This new township has been carefully planned taking into consideration the needs of house buyers. We have gained valuable feedback from our buyers and have new concepts and ideas on housing and environmental designs that will fulfil their more discerning expectations,” he added.

IOI’s future launches in Bandar Puteri Puchong would include higher end bungalows and corporate offices fronting the Damansara Puchong Expressway.

This is a big improvement from its early days as a pioneer developer in Puchong where the initial phases comprised modestly priced terrace houses “to attract buyers to the region.” To enhance the image of the once-remote region, the company ploughed in much investment in infrastructure, including the district police station and quarters, community hall, main roads, flyovers and the IOI Mall. As the company's success grew, its subsequent developments catered for a much wider catchment market.

Another early developer in Puchong, SP Setia Bhd also went on to become a big success in the property business.

Despite having moved on to the western growth corridor as its two flagship developments, Setia Alam and Setia Eco Park, are in Shah Alam, group managing director and chief executive officer Tan Sri Liew Kee Sin said the company was thankful for the opportunity to develop Pusat Bandar Puchong as it turned out to be a signature showcase of an SP Setia development.

“The mature township on 700 acres has all the hallmarks of innovative designs, quality workmanship, extensive landscaping and well-planned masterplan.

“Over the 10 years of developing Pusat Bandar Puchong, we have reinforced our reputation as a quality developer. Pusat Bandar Puchong is today regarded as one of the greenest and most well maintained townships in the vicinity.”