Minority Shareholders Of IOI Properties Are Screwed!

Ok, the title of this blog posting is perhaps a tinsy bit dramatic but it appears that the general market does agree with what's on my mind.

I absolutely deplore situations where a holding company chooses to delist its listed subsidiary.

I have made this a known issue many times before.

Yesterday, I wrote Big Ouch For IOI Properties!

On today's Star business, Raw deal for IOI Prop’s minority shareholders

• Analysts believe they deserve better offer
  
  PETALING JAYA: There is little doubt about IOI Corp Bhd’s Tan Sri Lee Shin Cheng’s ability to seize an opportunity when he sees it.

comments: yeah, tell me about this. Based on the offer price of 2.60, as pointed out in yesterday's posting, Big Ouch For IOI Properties!, "From a buyout option mooted last January costing about 1.5 billion, the buyout option now only cost around 506 million!!!! " And less we forget that IOI Corporation had stated publicly on January 2008 that there were no plans to privatise IOI properties!! see No plans to take property unit private: IOI Corp)

• The plantation group’s executive chairman and CEO’s move to buy out its property arm may not surprise many, but some analysts feel IOI Properties Bhd’s minority shareholders deserve a better deal.
  
  “We advise investors to sell the stock (IOI Prop) into strength,’’ CIMB Research said in a note to clients yesterday. The firm was “not keen” to swap IOI Prop’s shares for IOI Corp, but noted that the “alternative may be even less palatable.’’
  
  IOI Corp late Wednesday offered to buy the remaining 199.7 million shares from IOI Prop minority shareholders at 0.6 share in IOI Corp at market price plus 33 sen cash per IOI Prop share.
  
  This means that the offer price will fluctuate with IOI Corp’s share price movement. Shares in IOI Corp plunged 24 sen yesterday to RM3.68, while IOI Prop shot up 27 sen to RM2.49.
  
  CIMB has a target price of RM3.20 for IOI Corp.
  
  It opined that IOI Corp was “overvalued” at Wednesday’s closing price of RM3.92. It also argued that based on CIMB’s target price, the offer would equal RM1.92 worth of IOI Corp’s share plus 33 sen cash.
  
  This works out to RM2.25 per IOI Prop share.
  
  Maybank Investment Bank analyst Ong Chee Ting believed IOI Corp risked “low take-up rate” for its offer. Ong has a target price of RM2.90 for IOI Corp.
  
  “Although it is unlikely to go down well with IOI Prop’s minority shareholders, the delisting would encouraged them to sell’’ as they won’t risk holding shares in an unlisted company, he said.

comments: And I do NOT think it is correct that the minority shareholders are forced/threatened to sell their shares just because they are holding shares in an unlisted company! If the minority shareholders believes that their shares are worth more, then they should hold on to their shares!

• The deal breaker, however, are the government-linked funds Valuecap, Permodalan Nasional Bhd and the Employees Provident Fund, which collectively hold an estimated 10% stake in IOI Prop.
  
  “If they act in concert and reject the offer, IOI Corp won’t be able to get the 90% acceptance,’’ said Tan Ting Min, an analyst at Credit Suisse Securities Malaysia wrote in a note yesterday.

comments: Well it would be nice if these government-linked funds understand the value in IOI Properties!

Look at the chart of IOI Properties posted in yesterday posting Big Ouch For IOI Properties!.

With the offer price well below what IOI Properties had traded for the past 5 years, would it be wrong to assume that the offer price is way below the cost of investment price for these funds?

And if it's below their cost price, why sell? It would be really silly if they did sell yes?

• He believed, however, that the market would see the privitisation as “marginally positive” for IOI Corp as it was value enhancing.
  
  Credit Suisse upped its target price for IOI Corp from RM3.27 to RM3.31 yesterday.
  
  IOI Corp needs to increase its stake in IOI Prop to above 90% to take the company private. Even if it failed to get the required number, IOI Corp said on Wednesday, it intended to take the requisite steps to delist IOI Prop from Bursa Malaysia.
  
  “We believe the offer is fair, if not favourable, bearing in mind that IOI Prop may need to provide for impairment charges for its Sentosa Cove projects (in Singapore).’’ HwangDBS Vickers Research said in a report yesterday.

comments: fair? why bring out the issue of impairment charges for the Sentosa Cove projects?

How about talking about the fair value and the potential value of the Sentosa Cove project instead.

To sell now or to say that this offer is fair is like saying that there is absolutely no future in the Sentosa projects!!!!

Should IOI Properties minority shareholders give up this massive potential of the Sentosa Project?

How?

Flip it around.. and think for a minute... if this project has no future, what is IOI Corporation doing with this privatisation offer?

Fair?

• Based on Bloomberg’s consensus estimates, the IOI Corp offer was 36% below IOI Prop’s book value of RM3.63 and valued the company 8.9 times its forecast earnings for the year ending June 30, 2009.
  

comments: 36% below IOI prop's book value!

And how about the rights issue issued by IOI Properties less than a year ago?

• Historical data showed that IOI Prop shares had been consistently traded above its book value since early 2000 until the middle of last year when equity prices worldwide collapsed.
  
  “We lament the privatisation or delisting of IOI Prop as the company is one of the largest and most profitable developers in Malaysia and has been a benchmark and role model to many,’’ CIMB said.
  
  The firm said IOI Prop’s revised net asset value stood at RM6.15 per share, or RM5.2bil. At yesterday’s close, its market value was RM2.07bil.
  
  If the deal goes through, IOI Corp will fork out about RM64mil cash and issue some 116.9 million new shares at market price for the additional 24% stake in IOI Prop.
  
  The deal, pending approvals from shareholders of both companies, is targeted for completion by end-June.

Sad isn't it?

Is the stock market really a place where the major shareholder finds every possible way to screw its minority shareholders?

Of course it is, isn't it?

And would you even want to buy IOI Corporation now?

Would you?

Why?

Are you serious?