MBSB Research has maintained its BUY call on IOI Properties Group Bhd but lowered its target price to RM4.24 from RM4.64, citing concerns that the proposed acquisition and redevelopment of Shenton House in Singapore will place additional pressure on the group’s balance sheet.
IOI Properties is acquiring 100% of Shenton 101 Pte Ltd, the owner of Shenton House, through wholly-owned Boulevard View Pte Ltd.
Although the share purchase consideration is only S$1, IOI Properties will settle about S$217.1 million, or RM696.4 million, owed by Shenton 101 to Datuk Lee Yeow Seng, giving the group full ownership of the 25-storey commercial property in Singapore’s central business district.
MBSB noted that this is IOI Properties’ second attempt to acquire Shenton House. An earlier proposal in 2024 was rejected due to the group’s existing investments and capital commitments, although IOI Properties continued to act as project manager.
The research house said the group is now in a stronger position following the expansion of its Singapore portfolio, which includes IOI Central Boulevard Towers, South Beach and Asia Square Tower 2.
IOI Properties plans to redevelop Shenton House into a 35-storey mixed-use development comprising Grade A offices, retail space and a 165-room luxury hotel, with an estimated gross development value of S$1.61 billion, or RM5.2 billion.
MBSB is neutral on the acquisition itself, saying the redevelopment offers long-term value creation but will increase financial leverage in the near term.
The research house estimates IOI Properties’ net gearing could rise to 0.91 times from 0.88 times, while the group will also absorb Shenton 101’s FY2025 loss after tax of S$23 million.
MBSB estimates the acquisition could weigh on FY2027 earnings by about 8%, with meaningful benefits expected only over the longer redevelopment period.
It has left its earnings forecasts unchanged pending completion of the transaction but widened its discount to revised net asset value to 25% from 18% to reflect the higher gearing risk.
Despite the lower target price, MBSB said it continues to see value in IOI Properties, supported by ongoing landbank monetisation and the proposed IOIPG REIT listing, which remains a key near-term catalyst.
