IOI Properties Jumps After Malaysia Spinoff: Kuala Lumpur Mover

IOI Properties Group Bhd. surged 25 percent in its trading debut in Kuala Lumpur today to become Malaysia’s second-largest developer by market value.

The shares rose to close at 3.15 ringgit from a reference price of 2.51 ringgit, with 206.9 million shares traded, making it the day’s most-active stock by value. That gave it a market value of 10.2 billion ringgit ($3.1 billion), compared with 10.3 billion ringgit at the country’s largest listed developer KLCC Property Holdings Bhd., data compiled by Bloomberg show. The benchmark FTSE Bursa Malaysia KLCI Index lost 0.6 percent.

IOI Properties was relisted after 74-year-old billionaire Lee Shing Cheng decided to divide IOI Corp. into separate palm oil and real estate businesses, headed by different sons. Lee Yeow Seng, 35, was named chief executive of the property company last week, while Lee Yeow Chor, 47, was appointed to take over the helm at IOI Corp., Malaysia’s second-biggest palm oil group by market value.

The company’s size “should result in strong institutional and foreign investors’ visibility,” Kenanga Investment Bank Bhd. wrote in a report today. The company will gain from “resilient demand from township exposure.”

Kenanga rates the stock outperform with a price target of 3.68 ringgit. IOI Corp. lost 0.9 percent today.

IOI Properties’ township developments will provide the company with “sustainable” sales, RHB Capital Bhd. said in a Jan. 9 report, initiating coverage as a buy with a target price of 3.50 ringgit. IOI Corp.’s backing provided the real estate operations with a source of plantation land to convert at high margins, analyst Loong Kok Wen wrote.

Share Distribution

IOI Properties didn’t sell any new shares to the public during its listing. IOI Corp. shareholders were given shares in the property business through a distribution in-specie. There was also a restricted offer for sale.

“This year will be a challenging year in the face of several measures that’s been introduced by the government,” IOI Properties’ Yeow Seng told reporters in Kuala Lumpur today. “Nevertheless, we’re very positive because of our diversity in terms of geographical location and the different market segments that we serve throughout Malaysia, Singapore and China.”

Since winning a May election, Prime Minister Najib Razak unleashed a series of price increases to cut subsidies and improve state finances, including raising sugar and power prices. The government also introduced measures to cool the property industry.

Overseas Expansion

IOI Properties, based in Putrajaya, near Kuala Lumpur, has a track record of more than two decades in real estate, starting out in township development in Malaysia, according its prospectus. It later expanded into building mixed-used projects in Singapore and China, including homes, offices, hotels and shopping malls.

The company still has about 10,000 acres (4,047 hectares) of undeveloped land, the listing document shows. Its projects are estimated to generate sales over the next three years of about 10 billion ringgit in Malaysia, S$2.9 billion ($2.3 billion) in Singapore and 6.7 billion yuan ($1.1 billion) in China, it said.

IOI Properties also had 2.65 million square feet of lettable office and retail space as of June 30, the company said.

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