- IOI Corporation announced that it has taken over a 50% equity interest in Prime Joy Investments
Ltd for US$9.3mil (RM28.3mil). IOI would also take over shareholders’ advances amounting
up to US$30mil (RM91.9mil). In total, the acquisition cost for the 50% stake
would come up to US$39.5mil (RM120mil). A Taiwanese company was the original
owner of the 50% stake in Prime Joy.
- Prime Joy holds a 7.7 acre-piece of land in Xiamen, China.
According to its Bursa Announcement, the
acquisition would allow IOI to have better control and management of the
operations in Xiamen. Also, it would facilitate a timelier and efficient
decision-making process.
- We are neutral on the acquisition. The acquisition would
increase IOI’s shareholding in the Xiamen property project from almost 50% to
99.8%.
- According to news reports in October 2012, IOI had already started construction of its property
project in Xiamen.
- The gross development value of the mixed development
project is estimated at RM900mil while the acquisition cost of the land is
estimated at 314mil Yuan (RM150.3mil). The project is expected to consist of
900,000 sq ft of commercial and residential properties, which would be
completed in the coming two years.
- Apart from this, IOI would be starting work on a RM2bil
property development project, which would also be in Xiamen, this year.
- The acquisition cost of the land was about 1.2bil Yuan
(RM574.3mil). IOI has plans for a mixed development project comprising a
shopping mall, a hotel, office and residential properties.
- In spite of IOI’s growing property portfolio in China and
the nascent economic recovery in the country, we are only forecasting a 6%
increase in IOI’s property EBIT for FY13F. We believe that the group’s property
earnings would still be driven by the projects in Malaysia for the time
being.
- We maintain a HOLD recommendation on IOI for its growing
focus on property and manufacturing projects in China instead of plantation.
Source: AmeSecurities
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