IOI gets positive response on demerger plan but “neutral” calls by analysts

by **Cals** Wed 15 May 2013, 12:22

IOI gets positive response on demerger plan but “neutral” calls by analysts
Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Wednesday, 15 May 2013 12:12

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KUALA LUMPUR (May 15): IOI CORPORATION BHD []’s major demerger plan to split the group into PLANTATION [] and property entities is receiving positive response but only “neutral” calls from major research houses due mainly to its recent price run-up.

Ong Chee Ting, analyst at Maybank IB Research, said: “We are neutral on IOI Corp’s plan to split the group into two distinct entities – plantation and property – as the implied valuation for the group, at MYR5.53/share, is near its current share price.”

Also staying “neutral” is Ivy Ng of CIMB Research.

Keeping target price (TP) of IOI at RM5.53, she said: “Despite our positive view on the proposals, we remain neutral on IOI as we feel that its recent share price run-up has priced in the potential of this exercise.”

Hong Leong IB, also positive on the demerger plan, said: “TP is raised to RM4.97…Recommendation is upgraded from sell to hold”.

At 11.51 am today, IOI Corp share was traded at RM5.41, down by 5 sen or 0.9%, after surging by about 7% yesterday following the announcement.

Yesterday, IOI Corp announced at a press conference its demerger plan that will see IOI Corp maintaining its plantation operation.

After the completion of the exercise, IOI Corp will distribute about 66% of IOI Prop shares to IOI Corp’s existing shareholders on the basis of 1-for-3 IOI Corp shares, and make a non-renounceable restricted offer for sale (ROS) of the remaining 33% of IOI Prop shares to IOI Corp’s shareholders on the basis of 1-for-6 IOI Corp shares.

The ROS will be offered at a 30% discount to the final listing reference price to be determined later (implied to be RM2.51 per IOI Prop share).

The deal is targeted for completion by mid-Dec 2013.

Keeping IOI Corp TP at RM5.50, Maybank’s Ong commented that some investors have avoided IOI Corp for its growing property exposure in recent years,

It said the key risk is whether IOI Prop is able to command similar PER valuation to IOI Corp’s 19x 2014 PER upon listing.

CIMB’s Ng, in her report, advises investors to subscribe to the ROS due to its attractive pricing of 30% discount to the final listing reference price.