KLUANG: IOI Corp Bhd still has its entrepreneurial touch and will be able to
take advantage of any business opportunities quickly, said its executive
director Datuk Lee Yeow Chor.
Speaking to reporters and analysts on a
rare familiarisation trip to the group’s plantations in Kluang, Johor last
Friday, Lee said IOI Corp still has the ability to make quick
entrepreneurial-driven decisions when opportunity knocks.
“I think we
are still there, the touch of making quick decisions when opportunity comes. No
need to go through a lot of studies, this or that committee approval.”
“Of course, Tan Sri Lee [Shin Cheng] is still around, supported by all
the professionals,” he said, referring to IOI Corp’s executive chairman and CEO.
Lee is the eldest son of Tan Sri Lee.
Lee was commenting on IOI Corp’s
plans for the Euro medium term note programme for US$1.5 billion (RM4.73
billion) which it established recently, part of which will be utilised for
upstream acquisitions in Indonesia and its property projects in Singapore.
On the size of the upstream acquisition, Lee said the group has the
capacity for a major one although the opportunity remains unclear at the moment.
“Sometimes it just clicks,” he said of its investment in 33%-associate Bumitama
Agri Ltd, which it acquired in 2007.
Datuk Lee Yeow
“We were looking for [investment opportunities] for quite a number of years
in Indonesia. We looked at 10 to 12 opportunities. Suddenly this one, which we
didn’t even consider, came to us. This partner is Bumitama. Within two months we
closed the deal.”
“That’s the nature of M&A. Of course, we were
nothing in the 1980s and even early 1990s but we grew a lot through
acquisitions,” he said.
It is worth noting that IOI Corp had walked away
from a number of deals in the past. The latest one being the proposed
acquisition of 11,977.91ha from Dutaland Bhd which was subsequently aborted due
to non-compliance of certain terms and conditions. In May 2008, it terminated
the acquisition of 44,350ha in Sarawak, two months after it was first announced.
Soon after, it entered into a joint venture with Pelita Holdings Sdn Bhd
to acquire 7,000ha in Sarawak. However, the JV agreement was terminated in 2010.
In late 2008 as the global financial crisis brewed, IOI Corp terminated the
proposed purchase of Menara Citibank from owner Inverfin Sdn Bhd, forfeiting its
deposit of RM73.4 million.
Lee also said the group is
seeking to acquire a second piece of land in Xiamen, China. “We’re looking at
another substantial opportunity in Xiamen, which we’ll announce in one to two
months, much bigger than the first one”.
IOI Corp has a 3.1ha piece of
land in Xiamen, which it acquired for 314 million yuan (RM156 million),
according to its 2010 annual report. Construction of the mixed development
project on the first piece of land in Xiamen will commence once it gets the
necessary approvals, Lee said.
A view of IOI's downstream facilities in Pasir
“Again the land prices there have
increased, by about 20% since we bought the land almost two years ago. So we’ll
make a good profit out of that.”
Lee said the group chose to develop
property in Xiamen because it is one of the model cities in China and has been
recognised as one of the best managed and livable cities there.
very clean, well managed, and has an orderly administration with good transport.
We’ve cultivated quite a good relationship with city of Xiamen government,” he
On the South Beach project in Singapore, which it is developing
jointly with City Developments Ltd, Lee said construction commenced a few months
ago with an expected completion in 2015.
The project, with a GDV of
close to S$4 billion (RM9.85 billion), comprises five components — office,
retail, residential, hotel and club.
“We are only going to sell [the]
residential [component], the others we’ll keep for investment.”
acknowledged that cooling measures and the global economic slowdown have
affected the Singapore property market, including its development in Sentosa
IOI has two luxurious high-end projects in Sentosa Cove — Seascape
and Pinnacle Collection. Seascape was completed in 2011.
“Our sales are
not that good in Sentosa Cove but again we have two parcels of land. The entry
cost for one parcel is very low — we are able to make a 35% profit margin on the
first piece. Even though sales are slow, we are able to recover most of our
holding cost,” Lee explained. Pinnacle will be completed in 2014.
overall scenario is that there is no more land in Sentosa. We bought the last
piece of land there. There’s limited supply, when demand increases, the price
will go up.”
On its latest acquisition in Clementi Avenue in Singapore,
Lee said the piece of land will be targeted at the medium-cost segment.
“By our own internal projection, we are able to make 25% to 30% profit,
which we think is good. For the past two months, total transactions in Singapore
volume wise keep going to record highs — over 3,000 units per month but of
course it’s small units. So we’ll adjust our strategy
During the briefing, Lee confirmed
speculation that IOI Corp is looking to relist its property arm but no time
frame was given.
“Yes, we plan to but when, we don’t know. There’s no
time frame. We’ll look for [the] right opportunity. After all these big
investments, when we think people can see visible results, that’s the time to
relist,” he added.
However, he did not specify if the listing would be
on the Singapore Exchange as speculated.
The property arm IOI Properties
Bhd was taken private by IOI Corp in 2009 when the latter bought up the
remaining 24% minority stake it did not own via a share swap and cash.
On the group’s downstream segment, Lee said it is profitable despite
challenges from various fronts. For its refining business, IOI Corp is able to
carve out niche markets for itself amid intense competition from Indonesia
refiners who are now able to offer attractive prices due to lower export taxes.
Nevertheless, he said refining margins in Europe have not been good.
said the group’s speciality fats business is less susceptible to palm oil price
fluctuation due to its premium product, a cocoa butter equivalent which uses
palm oil and shea oil. The product also does not compete as a cooking oil but
against cocoa butter.
“So we are less affected by the Indonesia export
duties issue. But I must say that cocoa butter prices have dropped a lot, so our
prices also dropped,” Lee explained.
Nevertheless, given its large pool
of multinational customers, the group is still able to get a decent margin. “So
there’s no big growth but just maintaining for speciality fats,” he said.
Lee commented that the oleochemical business has shown improvement in
the last few quarters due to lower palm kernel oil prices. Higher margins in the
division compared to refining is another advantage.
“So even though
there’s this export duty differential between Indonesia and Malaysia we still
have a good profit. Of course, Indonesia makes more, but Malaysia also makes
RM300 margin (per tonne),” he added.
IOI Corp’s upstream business
contributed 55% to the group’s operating profit in FY11 ended June 30. The
property segment contributed 27% followed by the resource-based manufacturing’s
It has a planted area of 157,045ha in Malaysia and Indonesia,
according to its FY11 annual report.