THE relisting of IOI Corp Bhd’s property arm on Jan 15 provides both entities with separate platforms to pursue different growth and business strategies. It also gives greater visibility of the companies’ business performance.

IOI Properties Group Bhd was the first and largest of this year’s 14 listings, raising RM1.87 billion for IOI Corp through a restricted offer for sale.

IOI Properties did not issue new shares. It did not have to as it was not in need of cash. At the point of listing, it had a net gearing of only 0.05 times and a landbank of 10,000 acres — one of the largest among the listed developers — and a total market valuation of RM8.1 billion as appraised by independent valuers.

IOI Corp distributed 2.13 billion of its existing shares in IOI Properties to entitled IOI Corp shareholders on the basis of one IOI Properties share for three IOI Corp shares held. Then, IOI Corp offered to sell 1.07 billion IOI Properties shares for RM1.76 each to its shareholders on the basis of one-for-six shares.

With a reference price of RM2.51 per share, IOI Properties became the second largest property developer in terms of market capitalisation as the company was valued at RM8.13 billion upon its listing.

It seemed wise for IOI Corp to spin off its property assets to unlock the value of its property development arm. After being privatised by IOI Corp over four years ago, the property arm’s total assets had grown nearly three times to RM12.59 billion as at June 30, 2013, the full financial year before its listing.

IOI Properties reached a high of RM3.453 on listing day, a 37.6% premium to its reference price of RM2.51. However, the shares have averaged at RM2.52 since then. They ended last Wednesday at RM2.27, 9.6% lower than the reference price.

This was partly due to the softening property market that has soured investor sentiment on the sector. At the time of writing, IOI Properties’ market value was 9.92% lower than its IPO value of RM7.35 billion. Still, it managed to retain the second spot below SP Setia Bhd, which has a market capitalisation of RM8.22 billion.

AmInvestment Bank and RHB Investment Bank were the joint principal advisers and joint global coordinators for the IPO. Standard Chartered Securities (Singapore) Pte Ltd was also a joint global coordinator.

While analysts were optimistic about IOI Properties before the listing because of its clean balance sheet and wide operating margin, they seem to be lukewarm on the stock now. Currently, three out of eight analysts who cover it have a “buy” call while the others have a “hold”.

Its RM101.001 million net profit for 1QFY2015 ended Sept 30, 2014, was 9.06% lower than the previous corresponding quarter’s RM111.06 million. Revenue, however, increased 33.82% year-on-year to RM375.52 million.

The group said the lower profit was due to a decrease in results from associates and joint ventures, as well as higher net interest expense.

Recently, IOI Properties raised eyebrows when it sought to buy a 37.17% stake in Taipei Financial Center Corp, which owns Taipei 101. While the tower offers a decent yield of 5% and is nearly fully occupied, the RM2.74 billion price tag for the stake accounts for nearly a third of IOI Properties’ market capitalisation.

The group’s net gearing level will also increase from 0.16 times to 0.4 times, which is near the optimum threshold of 0.5 times for property developers. Taiwan’s politicians have also protested, saying that a foreigner would own a sizeable stake in the country’s landmark.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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