By Khairie Hisyam
The first IPO of the year is certainly making a grand entry. But for many investors who danced with IOI Properties Group in the past, the return of the company to Bursa Malaysia is a painful reminder of its 2009 delisting. Looking back, Tiger can only wonder what could have been had things taken a different turn.
IOI Properties Group (IOIPG) has certainly returned with a bang after leaving our jungle in 2009 (known then as IOI Properties).
Its first day of listing alone saw a 23.1% rise in share price from the reference price of RM2.51 to RM3.09 per share as at the noon break — it’s a good day for IOIPG shareholders. Nay, make that a great one, because lest we forget, most of the shareholders got their shares for free.
Approximately two thirds of IOIPG’s current share base of about 3.23 billion units was distributed to IOI Corp’s shareholders at one IOIPG share for every three IOI Corp shares held as at Dec 19, 2013.
Of course Tiger understands that the gain in IOIPG comes at the expense of IOI Corp’s market capitalisation, which will likely correct to reflect the separation of its property component. As at today’s noon bell IOI Corp was traded at RM4.21 per share, down 39 sen from RM4.60 on Dec 19.
But all in all, the average shareholder makes good money. For the sake of simplicity, let’s assume Tiger held 12 shares in IOI Corp which was bought on the ex date, Dec 19, 2013 — the price then was RM4.60.
That means as at Dec 19, the value of Tiger’s shareholding would have stood at RM55.20, which we shall consider as the cost.
Fast forward to today’s market debut (or is that re-debut?) of IOIPG, Tiger would now have four shares in IOIPG in addition to the 12 units in IOI Corp. Going by the market prices at 12.30pm, Jan 15, the four IOIPG shares would be worth RM12.36 while Tiger’s original 12 units in IOI Corp would be worth RM50.52.
On Jan 15, Tiger would have RM62.88 in shareholding value, up RM7.68.
Now that does not take into account the fact that Tiger would have been eligible to subscribe to the restricted offer for sale (RoS) of about a third of IOIPG’s shares — one IOIPG share for every six IOI Corp shares at RM1.76, a 30% discount to the reference price of RM2.51.
For the sake of simplicity, let us assume Tiger got his full entitlement of two IOIPG shares despite the oversubscription, which Tiger must say is a nice thing despite the unusual timing of the subscription period. Two IOIPG shares would add RM6.18 to Tiger’s total shareholding value with an outlay of RM3.52.
That means being an IOI Corp shareholder on Dec 19 would lead to Tiger likely having RM69.06 in total shareholding value from a total outlay of RM58.72 — a 17.6% return in less than a month.
Here’s the thing: IOIPG is expected to trend upwards soon to the RM3.68―4.01 range, so the returns margin could be higher if Tiger times it right.
Lee Shin Cheng
So Tiger must applaud Lee Shin Cheng’s move to re-list IOI’s property business, because it is a clearly great deal for his shareholders. As for the selling shareholder IOI Corp, which held a 98.66% stake before the initial public offering (IPO), they’re getting the entire amount of RM1.875 billion raised from the RoS.
That said, Tiger imagines there must be a wave of wistfulness among investors who used to hold shares in IOI Properties just before its delisting in April 2009.
Why? Older jungle creatures would remember that the minority shareholders were offered about RM2.60 per share in the voluntary take-over exercise by IOI Corp, controversially at only 0.66 times the net tangible assets (NTA) valuation of IOI Properties.
Let’s see what happened through the eyes of the average investor. In April 2008, just one year before the delisting, IOI Properties’ shares were just below the RM6.00 mark.
And just two months before that, IOI Properties invited its shareholders to invest more money in a share split and rights issue exercise — one rights share for every four existing IOI Properties shares — at an issue price of RM5.50.
Of course, if Tiger were to hold IOI Properties shares back then, Tiger would likely have accepted the invitation, because in January 2008 IOI Properties announced an exciting joint venture into the Singapore property market.
But at the time IOI Properties’ share price were on a downward slide due to weak quarterly earnings, eventually hitting a seven-year low in end-2008 and leading to cheap valuations. Which led to IOI Corp privatising IOI Properties with an offer of RM2.60 per share.
According to IOI Properties’ 2008 annual report, IOI Corp held 72.01% of shares in IOI Properties back then and with a 98.66% stake just prior to IOIPG’s return to Bursa Malaysia today, that implies that about 25% of IOI Properties’ shares were sold back to IOI Corp during the 2009 delisting exercise.
Would RM2.60 per share cover the cost per share of the average investor back then? Tiger doubts it. It would have hurt many investors who saw the value of their money reduced greatly.
When news of IOI Properties’ return to the stock market surfaced, a fund manager remarked his disappointment at having to sell out of IOI Properties in 2009.
Gerald Ambrose
“We considered the privatisation price of 0.66 times to its net tangible asset as greatly undervalued. We hope that this will not happen again,” said Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose last year.
Hence Tiger thinks there is no small amount of wistfulness and resentment among other former IOI Properties investors. Essentially forced to sell out at what was likely a big loss in 2009 and now having to watch someone else make money out of what you were forced to let go cannot be pleasant.
Of course there is the argument that IOI Properties has grown tremendously since its delisting and that neither incarnation can be directly compared, but to that Tiger asks: who is to say IOI Properties would not have grown tremendously anyway had it stayed listed all these years?
Alas, technically the minority shareholders could’ve held on and stayed shareholders in the unlisted entity post-delisting, but they had no way of knowing if IOI Properties would be relisted at all down the road.
Nor do they know if they will ever get anything from their now unquoted shares given that any dividends from IOI Prop will be at the board’s discretion, meaning there is limited exit strategy available to them had they refused to sell.
Essentially these minority shareholders got the short end of the stick by virtue of not being able to tell the future in making investment decisions.
Then again, who can tell the future? Who could have known that holding onto IOI Properties shares as it went private would have been a great idea after all?
Who could have known that, despite the apparent desperation for shareholders back then, IOI Properties would have been relisted just four years on at such a good deal for those who held on?
GRRRRR!
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