KUALA LUMPUR (Oct 21): IOI Properties Group Bhd rose as much as eight sen or 4% on a proposed land deal with controlling shareholder Tan Sri Lee Shin Cheng's family. The deal prompted analysts to upgrade the stock.
 
IOI Properties is acquiring the entire stakes in Mayang Development Sdn Bhd and Nusa Properties Sdn Bhd for RM1.58 billion from the Lee family under a cash and share deal. Mayang and Nusa Properties have land near IOI Properties' development in Putrajaya.

Shares of IOI Properties rose to their highest so far today at RM2.20. At 9:06am, the stock pared gains at RM2.17 with 173,200 units done.

Hong Leong Investment Bank Bhd analyst Jason Tan said the research firm upped its target price (TP) for IOI Properties shares to RM2.77 from RM2.27. The upgrade came with an unchanged "buy" call for the stock.

In a note today, Tan said the new TP took into account a higher revised net asset value (RNAV) estimate for IOI Properties, which was deemed undervalued in price-book value terms.
 
"We estimated the acquisition to increase RNAV by 17%, offsetting the 17% dilution in enlarged share base. IOIProp is one of the value stock in our universe coverage given it is only trading at 0.58x FY16 P/B as compared to peer average at 1x.

"The acquisition price translated to RM117 psf, as compared to third party valuer (estimate) at RM144 psf and average transaction price of RM120-150 psf in Putrajaya and Cyberjaya. Land cost is about 10% of total GDV, (hence) we deemed the acquisition price as fair," he said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)