IOIProp cements regional real estate push
PETALING JAYA: IOI Properties Group Bhd 's (IOIProp) latest move to take full control of Singapore's landmark South Beach development signals a bold step towards consolidating its regional real estate ambitions.
Analysts see this as a strategic pivot that could both unlock value and test the developer's capital discipline.
Hong Leong Investment Bank Research (HLIB Research) described the acquisition as 'a strategic and value-accretive move'.
The research house said the transition from a 49.9% joint-venture stake to full ownership unlocks several key advantages – including full strategic control, operational synergies, and immediate earnings uplift.
'The South Beach assets are already income-generating, providing an immediate boost to IOIProp's earnings base and recurring income stream,' HLIB Research highlighted.
'Post-acquisition, IOIProp cements its status as one of the largest asset owners not only in Singapore, but also (as) a growing regional real estate powerhouse,' it added.
HLIB Research maintained its 'buy' call on the stock with an unchanged target price (TP) of RM4.05 per share.
It estimated an earnings per share uplift of 1.63 sen for IOIProp in 2026, while net gearing is expected to rise to 0.93 times from 0.7 times as of June 30, 2024.
'Despite concerns over higher gearing, the risks appear manageable given its stable recurring income, strong assets and upcoming real estate investment trust (REIT) listing plan,' HLIB Research said.
TA Research took a more cautious view, noting: 'We are somewhat surprised by this acquisition, as we had earlier anticipated that the group would prioritise managing its already elevated net gearing levels.'
It estimated that, if fully debt-funded, IOIProp's net gearing would climb to 0.87 times.
'IOIProp may be positioning itself for the establishment of a REIT, given its maturing investment property portfolio,' TA Research said, highlighting that it carried a total book value of RM21.3bil as of the financial year ended June 30, 2024.
'Such a move would help cushion the impact of the South Beach acquisition on IOIProp's gearing profile,' it added.
TA Research reiterated its 'buy' call, with an unchanged TP of RM2.78, citing IOIProp's historical willingness to raise equity capital to fund strategic investments.
Meanwhile, MIDF Research adopted a neutral stance, highlighting that IOIProp's net gearing would increase to 0.87 times post-acquisition.
It acknowledged that 'the acquisition will allow IOIProp to have full control and management of the South Beach property, which is generating investment income.'
MIDF Research revised its TP for the stock to RM1.79 from RM1.84, after widening the revalued net asset value discount to 65% from 64% in view of the company's higher net gearing. It kept its 'neutral' rating on the developer, citing limited near-term catalysts.
IOIProp had announced that its unit, IOI Consolidated (Singapore) Pte Ltd, had signed a conditional share sale agreement to acquire the remaining 50.1% stake in Scottsdale Properties Pte Ltd, owner of South Beach, for about S$834.22mil.
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IOIProp cements regional real estate push
PETALING JAYA: IOI Properties Group Bhd 's (IOIProp) latest move to take full control of Singapore's landmark South Beach development signals a bold step towards consolidating its regional real estate ambitions. Analysts see this as a strategic pivot that could both unlock value and test the developer's capital discipline. Hong Leong Investment Bank Research (HLIB Research) described the acquisition as 'a strategic and value-accretive move'. The research house said the transition from a 49.9% joint-venture stake to full ownership unlocks several key advantages – including full strategic control, operational synergies, and immediate earnings uplift. 'The South Beach assets are already income-generating, providing an immediate boost to IOIProp's earnings base and recurring income stream,' HLIB Research highlighted. 'Post-acquisition, IOIProp cements its status as one of the largest asset owners not only in Singapore, but also (as) a growing regional real estate powerhouse,' it added. HLIB Research maintained its 'buy' call on the stock with an unchanged target price (TP) of RM4.05 per share. It estimated an earnings per share uplift of 1.63 sen for IOIProp in 2026, while net gearing is expected to rise to 0.93 times from 0.7 times as of June 30, 2024. 'Despite concerns over higher gearing, the risks appear manageable given its stable recurring income, strong assets and upcoming real estate investment trust (REIT) listing plan,' HLIB Research said. TA Research took a more cautious view, noting: 'We are somewhat surprised by this acquisition, as we had earlier anticipated that the group would prioritise managing its already elevated net gearing levels.' It estimated that, if fully debt-funded, IOIProp's net gearing would climb to 0.87 times. 'IOIProp may be positioning itself for the establishment of a REIT, given its maturing investment property portfolio,' TA Research said, highlighting that it carried a total book value of RM21.3bil as of the financial year ended June 30, 2024. 'Such a move would help cushion the impact of the South Beach acquisition on IOIProp's gearing profile,' it added. TA Research reiterated its 'buy' call, with an unchanged TP of RM2.78, citing IOIProp's historical willingness to raise equity capital to fund strategic investments. Meanwhile, MIDF Research adopted a neutral stance, highlighting that IOIProp's net gearing would increase to 0.87 times post-acquisition. It acknowledged that 'the acquisition will allow IOIProp to have full control and management of the South Beach property, which is generating investment income.' MIDF Research revised its TP for the stock to RM1.79 from RM1.84, after widening the revalued net asset value discount to 65% from 64% in view of the company's higher net gearing. It kept its 'neutral' rating on the developer, citing limited near-term catalysts. IOIProp had announced that its unit, IOI Consolidated (Singapore) Pte Ltd, had signed a conditional share sale agreement to acquire the remaining 50.1% stake in Scottsdale Properties Pte Ltd, owner of South Beach, for about S$834.22mil.
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