IOI Properties’ REIT listing could unlock special dividend in FY2027

KUALA LUMPUR (April 13): A potential special dividend could be on the horizon for IOI Properties Group Bhd’s (KL:IOIPG) shareholders, as the group’s REIT listing may unlock substantial cash proceeds that management could partially distribute. 

Hong Leong Investment Bank (HLIB) said that based on the assumption of a 20% payout from the RM4.26 billion cash monetisation of the REIT exercise, this would translate into roughly 15 sen per share in additional dividends, while a similar 20% payout from land sale gains could contribute another two sen. 

"Combining these with an estimated normal DPS (distribution per share) of 11 sen, total FY2027 DPS could reach about 28 sen, implying a compelling dividend yield of about 7.7%." the house said in a note on Monday. 

Meanwhile, the final initial public offering (IPO) price, determined through book-building, may differ from the indicative 90 sen per unit based on current asset appraisals, said HLIB.

However, the valuation comparable prime M-REITs such as IGB Real Estate Investment Trust (KL:IGBREIT) (about 1.9 times price/book value), Sunway REIT (KL:SUNREIT) (about 1.5 times), and Pavilion REIT (KL:PAVREIT) (about 1.3 times) often trade at premiums to book value. 

"Assuming the REIT is priced at a more conservative 1.3 times book value (towards the lower end of comparable peers), the proceeds from the offer-for-sale units could increase to approximately RM2.57 billion (RM1.98 billion times 1.3), representing [about] an additional RM590 million in cash proceeds versus the base case assumption," it added.

The house noted that IOI Properties has a history of rewarding shareholders — raising its DPS to eight sen in FY2025 from five sen previously, a move that surprised investors given expectations that net gearing would exceed 90% after the South Beach acquisition. 

The REIT listing also demonstrates IOI Properties' value-creation ability: IOI City Mall saw a 161% appreciation to RM5.1 billion versus its RM1.95 billion cost, Le Méridien Putrajaya recorded a 154% uplift, and W Hotel KL — acquired in 2024 — is now valued 53% above its purchase price. 

Looking ahead, HLIB said the group incubates a larger portfolio of prime Singapore assets valued at more than triple its Malaysian REIT portfolio. 

HLIB maintains a conviction 'buy' with an unchanged target price of RM4.15 on the stock, based on a 30% discount to estimated revalued net asset value (RNAV) of RM5.93. 

Separately, Kenanga Research revised its valuation approach for IOI Properties from pure RNAV discount to sum-of-the-parts methodology to include the valuation accretion from the listing of IOIPG REIT.

"Thereby allowing for a more accurate reflection of its the embedded value to the group," it said.

"We lower our group-level property development discount-to-RNAV of 40% (which we had previously lowered from 55%), as we believe it will continue to capture the remaining upside benefit the group could gain should its S-REIT listing materialise in the near term. 

Kenanga Research upgraded the stock to 'market perform', lifting its target price to RM3.70, while BIMB Securities remained more bullish with a 'buy' call and a target price of RM3.96.

At noon break, IOI Properties' shares hit a two month high, down 10 sen or 2.8% at RM3.53, valuing the group at RM19.4 billion.