The property group’s shares hit an intraday high of RM3.96 in early trading, a 19 sen or 5.04% rise, before paring its gains to close three sen or 0.8% higher at RM3.80, valuing the group at RM20.92 billion.
The shares have risen nearly 10% since it announced last Friday a proposal to list a REIT on Bursa Malaysia with assets worth a total of RM7.58 billion. The stock has surged 43% year to date, and a whopping 108% over the past one year.
Research houses and investors are anticipating further upside for the stock based on the potential of IOI Properties spinning off some of its Singapore property assets into a REIT across the causeway.
Hong Leong Investment Bank (HLIB) said the upcoming REIT listing marks the first step in unlocking value from IOI Properties’ Malaysia assets, but the larger re-rating driver lies in its Singapore portfolio, which is over three times larger.
“This is further underpinned by a structural upcycle in the Singapore office market, with tight supply and strong demand supporting the future rental reversion.
“Meanwhile, the China segment is emerging as a quiet compounder as assets transition into recurring income, supported by improving traction and upcoming metro connectivity,” HLIB said in a note today.
It maintained its “buy” call with a higher target price (TP) of RM5.20 from RM4.15 previously. Its latest TP represents a 37% upside from the current price.
TA Research also kept its “buy” call on IOI Properties and raised its TP to RM4.47 from RM4 previously.
“Looking ahead, successful execution of the Malaysia REIT listing could also shift market focus towards a potential Singapore REIT listing, which may represent a more meaningful second leg of value unlocking and further deleveraging,” the research house said in a note.
In an exchange filing last Friday, the group revealed plans to inject a portfolio of its Malaysian properties including IOI City Mall and IOI City Park into the proposed trust – IOIPG Malaysia REIT – which will be listed on the Main Market.
The group said the injection of assets into the REIT will be satisfied via the issuance of 5.5 billion units at an indicative price of 90 sen each, and RM2.65 billion cash, which will be financed via borrowings raised at the REIT level.
After the asset injection, IOI Properties plans to offer up to 2.2 billion units or 40% of the REIT to investors through a mix of retail and institutional placements.
TA Research said based on the issue price, IOIPG REIT is expected to have a market capitalisation of about RM5 billion, making it the fifth-largest Malaysian REIT after KLCC Stapled Group, IGB REIT, Sunway REIT and Pavilion REIT.