Syariah compliance, REIT plans to boost IOIPG
PETALING JAYA: A combination of factors including impending syariah-compliance status and the potential listing of commercial assets into a real estate investment trust (REIT) structure are growth catalysts for IOI Properties Group Bhd (IOIPG) this year.
HLIB Research, which has maintained a “buy” call on the stock with an unchanged target price of RM4.05 believes that multiple key catalysts are unfolding, positioning the company as a standout performer among property stocks in 2025.
“Our target price also reflects our view that IOIPG has the potential to be included in the KLCI index, a possibility that could materialize by end-2025 or 2026, further enhancing its investment appeal,” it added.
The research house said that the stock stands a good chance to be classified as syariah-compliant in the upcoming May review of stocks after the company’s conventional loan-to-total assets ratio declined to 32.6%, or below the 33% required to be syariah-compliant.
It said the stock’s classification as syariah-compliant would attract interest from domestic syariah funds as there could also be a re-rating on the horizon driven by higher demand for exposure to a major property developer which has not received much coverage due to a limited free-float of shares as the founding Lee family collectively owns nearly 75% of the shares.
HLIB Research said the company has also been preparing for a REIT listing with preliminary studies underway to determine which assets to inject for a potential market capitalisation of RM7bil. “We believe a 2026–2027 listing is likely, with selected Malaysian commercial assets as prime candidates, given that several high-quality assets are now ripe for monetization,” it said, adding that its IOI Resort City (IRC) together with four hotels in the same location have been performing well.
“We see IOI City Mall and IRC’s four hotels as top candidates for REIT injection. IOI City Mall, which completed Phase 2 in August 2022, is set to complete its first round of rental reversion for most tenants by end-2025, which should boost rental yields,” it said. Other potential REIT assets include W Hotel KL, Courtyard Penang Hotel, PFCC Puchong office and IOI City Tower Putrajaya office.
“This should unlock significant capital for IOIPG, reducing its net gearing and providing more capital headroom for its other investments,” it noted.
Another key catalyst for the company would be its 2,104.36-ha landbank in Johor, the largest landbank among developers in the state, which launched the Johor-Singapore Special Economic Zone earlier in January. The research house said IOIPG’s 445.15-ha industrial landbank in Kulai, an industrial hotspot, “is well-positioned” to target the high-growth technology space.
There could be potential land sales to data centre players and other high-tech industrial investors. “Other than this, it also has a very sizeable 1,133.11 ha of residential land in Kulai, which is poised to capture rising demand from the vibrant growth in nearby industrial developments,” it said.