IOI positive on property market outlook

PUTRAJAYA: While a slowdown in the property market is to be expected in the near term following the cooling measures announced under Budget 2014 last Friday, IOI Corp Bhd group executive chairman Tan Sri Lee Shin Cheng said he remains optimistic about its longer-term outlook as consumers digest the changes in due time.

Lee was speaking to reporters after the company EGM yesterday which saw shareholders approving the demerger of IOI Corp’s property arm.   

“With the measures to curb rising house prices in Budget 2014, the speculative market will fade off. The sales will slow down. However, we believe genuine house buyers will come back and continue to drive the market.

“There is no telling when the market will pick up again, but I believe the slowdown will occur in the next two to three months. Consumers will digest the ‘shock’ and eventually come back to the market,” Lee said.

Lee said upon completion of the demerger exercise, IOI Properties Group Bhd would be listed on Bursa Malaysia next January with an expected market capitalisation of RM14 billion.

“We are now at the final stage and we have received approvals from Securities Commission Malaysia and Bursa Malaysia for the listing,” he said.

IOI Corp will receive proceeds of RM1.9 billion from the proposed non-renounceable restricted offer for sale of IOI Properties shares to entitled shareholders.

“IOI Corp will use part of the money to redeem the bond worth US$500 million (RM1.57 billion) and the balance will be for working capital,” Lee said.

This would bring IOI Corp’s total borrowings down to RM5.4 billion from RM7.3 billion.

Lee added that IOI Properties contributed about 30% to 40% of IOI Corp’s revenue.

“After the listing, IOI Corp would focus on its plantation business and enhance its participation in downstream activities which would give more value to the company,” he said.

Commenting on the increase in the minimum price of property purchase by foreigners from RM500,000 to RM1 million, Lee believes Singaporeans will still be purchasing properties in Iskandar Malaysia.

He added that they could purchase bigger properties, such as bungalows, which sell at around RM1.3 million each.

“In addition, the construction of public transportation such as the MRT and KL-Singapore High Speed Rail will be appealing to the Singapore market, as it offers travelling convenience,” Lee added.

This article first appeared in The Edge Financial Daily, on October 30, 2013.