IOIPG (5249) : RHB Research Neutral on IOI Properties fund raising
KUALA LUMPUR: RHB Research is Neutral on IOI Properties Group’s equity fund-raising exercise to raise RM1.03bil, as the dilution impact on revised net asset value (RNAV) and earnings could be mitigated once new landbank is secured and/or IOI City Mall Putrajaya is revalued.
The research house had on Tuesday maintained its Buy recommendation and lower target price for now on the immediate impact to RM3.10 (14.8% upside).
It said 50% of the proceeds will be used to fund the development of investment properties, which should enhance the assets’ future value.
IOIPG announced its proposed rights issue exercise on the basis of one rights share for every six existing IOIPG shares at an issue price of RM1.90 per rights share (at a 30% discount to Monday’s closing price).
In the meantime, it also proposed an employee share option scheme (ESOS) of up to 10% of the enlarged share capital. The rights are expected to raise RM1.03bil.
RHB Research said while the market may be surprised with the fund-raising exercise, as the company was only listed in January this year, with its current net gearing of only 13%, management indicates that no cash was raised during the IPO, as shares were distributed as dividend-in-specie to IOI Corp’s (Neutral, TP: RM4.50) shareholders.
Hence, financing is needed mainly to support the construction of infrastructure and development of investment properties (RM500mil), such as IOI City Mall Putrajaya, and the offices and hotels in IOI Resort City.
“Meanwhile, RM325mil is allocated for working capital, mainly for the new township projects such as Bandar Puteri Bangi and Bandar Puteri Warisan. The remaining RM200mil will be the company’s war chest for future investment opportunities, such as land banking exercise. Equity funding is generally a preferred choice, especially in a rising interest rate environment.
“The exercise is expected to be completed by 1QCY15. As such, we lower our EPS estimate by 4% for FY15, and 14% for FY16-17.
“Note that we do not factor in the impact of the ESOS as the exercise price has yet to be determined and it has tenure of five years, and hence, the conversion will not be immediate,” it said.
http://www.thestar.com.my
KUALA LUMPUR: RHB Research is Neutral on IOI Properties Group’s equity fund-raising exercise to raise RM1.03bil, as the dilution impact on revised net asset value (RNAV) and earnings could be mitigated once new landbank is secured and/or IOI City Mall Putrajaya is revalued.
The research house had on Tuesday maintained its Buy recommendation and lower target price for now on the immediate impact to RM3.10 (14.8% upside).
It said 50% of the proceeds will be used to fund the development of investment properties, which should enhance the assets’ future value.
IOIPG announced its proposed rights issue exercise on the basis of one rights share for every six existing IOIPG shares at an issue price of RM1.90 per rights share (at a 30% discount to Monday’s closing price).
In the meantime, it also proposed an employee share option scheme (ESOS) of up to 10% of the enlarged share capital. The rights are expected to raise RM1.03bil.
RHB Research said while the market may be surprised with the fund-raising exercise, as the company was only listed in January this year, with its current net gearing of only 13%, management indicates that no cash was raised during the IPO, as shares were distributed as dividend-in-specie to IOI Corp’s (Neutral, TP: RM4.50) shareholders.
Hence, financing is needed mainly to support the construction of infrastructure and development of investment properties (RM500mil), such as IOI City Mall Putrajaya, and the offices and hotels in IOI Resort City.
“Meanwhile, RM325mil is allocated for working capital, mainly for the new township projects such as Bandar Puteri Bangi and Bandar Puteri Warisan. The remaining RM200mil will be the company’s war chest for future investment opportunities, such as land banking exercise. Equity funding is generally a preferred choice, especially in a rising interest rate environment.
“The exercise is expected to be completed by 1QCY15. As such, we lower our EPS estimate by 4% for FY15, and 14% for FY16-17.
“Note that we do not factor in the impact of the ESOS as the exercise price has yet to be determined and it has tenure of five years, and hence, the conversion will not be immediate,” it said.
http://www.thestar.com.my
