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OSK Research maintains 'sell' call on IOI Corp

KUALA LUMPUR: OSK Research is maintaining its "sell' call on IOI Corp Bhd at a fair value of RM4.41.

"As IOI is an established developer like City Development, we have little doubt that the venture into the Singapore property market will be profitable.

"However, as with its previous venture into property development outside Malaysia, the market does not reward the company in terms of stock price appreciation, as investors invest in IOI not for its property exposure, particularly outside Malaysia," the research house added.

IOI recently purchased 49.9% equity in Scottsdale Properties from Ascent View Holdings for RM276 million and through this equity purchase, it will be involved in the development of South Beach, a mixed use development land parcel located along Beach Road, Singapore.

The group expects to invest up to RM1.96 billion on the project.

While the initial outlay of RM276 million is small relative to IOI's net debt of RM1.275 billion, the total investment of RM1.96 billion will result in its net gearing jumping to 20% in the next 12 months.

"This is assuming that IOI generates RM1 billion in operating cash flow during the period.

"Otherwise, the company's net gearing will rise to a high of 29%," it added. — Bernama

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