IOI Properties Group Berhad received a NEUTRAL rating from MIDF Investment Bank (MIDF) with an unchanged target price of RM2.40, representing a 6.7% upside and a 2.2% FY24F yield. IOIPG has announced a proposal for the joint development of Shenton House in Singapore, where the proposal received by The Board of Directors is for IOIPG to acquire Shenton 101 Pte Ltd (“Shenton 101”) for the redevelopment of “Shenton House”, a commercial property located at 3 Shenton Way, 068805 Singapore (“Shenton House”).
The proposal aims to avoid a conflict of interest as IOIPG is also involved in property development and investment in Singapore. Shenton House, spanning 3,377 square metres with a 44-year remaining lease, is set for redevelopment into a new 99-year leasehold commercial property, with works scheduled to start at the end of 2025. Lee Yeow Seng has stated that he intends to avoid personal gain from this proposal.
MIDF views the proposal as neutral for IOIPG. The redevelopment of Shenton House is expected to bolster IOIPG’s presence in Singapore following the completion of the Central Boulevard Towers and the ongoing development of Marina View Residences. However, the total cost of the project, estimated at SGD1.01 billion, could strain IOIPG’s balance sheet, increasing net gearing from 0.74x in 3QFY24 to an expected 0.89x.
Earnings forecasts remain unchanged, with MIDF maintaining the target price of RM2.40, based on a 53% discount to RNAV. The launch of Marina View Residences in Singapore is anticipated to boost property sales beyond FY25, and the potential listing of IOIPG’s investment properties could unlock additional value. Despite these prospects, the limited upside supports the maintained NEUTRAL rating.
The house advises investors to consider IOIPG shares cautiously due to the neutral impact of the Shenton House proposal and potential balance sheet strain, despite future growth opportunities in Singapore’s property market. The current target price of RM2.40 reflects these considerations, offering a modest potential return.“
Seperately, the group has stated that the proposal received by The Board of Directors is for IOIPG to acquire Shenton 101 Pte Ltd (“Shenton 101”) for the redevelopment of “Shenton House”, a commercial property located at 3 Shenton Way, 068805 Singapore (“Shenton House)
