IOIPG on the right track

PETALING JAYA: Analysts are less cautious on IOI Properties Group Bhd’s (IOIPG) recent agreement to acquire Shenton 101 Pte Ltd, which owns Singapore’s Shenton House, than they were in 2024 due to the group’s current “capital-recycling path”.

TA Research said in a report following the group’s purchase of Asia Square Tower 2 (AST2) earlier this year, it forecasts the company’s financial year ending June 30, 2027 (FY27) net gearing to be at 1.16 times, materially higher than when Shenton House was first considered in 2024.

“What has changed is IOIPG’s ability to recycle capital from its growing investment-property portfolio,” it told clients.

Last Thursday, IOIPG’s wholly-owned subsidiary Boulevard View Pte Ltd said it had entered into a conditional agreement to acquire 100% of Singapore’s Shenton 101 for S$1, with the transaction carrying an aggregate value of about S$217.06mil (RM696.43mil), including the repayment of shareholder advances.

IOIPG said the conditional agreement was with the company’s group chief executive officer and major shareholder Datuk Lee Yeow Seng and Shenton 101, which owns Shenton House.

This acquisition marks a reversal of IOIPG’s earlier decision in August 2024, which was not to proceed with Lee’s previous proposal to buy Shenton 101 amid the company’s ongoing capital commitments.

TA Research noted that the acquisition will be funded through internally generated funds and did not require shareholder approval, as the highest percentage ratio of 3.79% is below the 5% threshold under Bursa Malaysia’s listing requirements.

IOIPG has nevertheless voluntarily appointed Affin Hwang Investment Bank as independent adviser given the related-party nature of the transaction, it added.

TA Research said Singapore commercial fundamentals remained supportive.

Core central business district Grade A office vacancy was low at 3.3% in the second quarter of financial year 2026 (2Q26), with market consultants forecasting circa 4% to 6% rental growth for 2026 amid tight new supply, it said.

The research house said prime retail rents continued to rise in the first half of financial year 2026, with low-single-digit growth expected, while the hotel investment market recorded more than S$1.1bil of transactions in 2Q26.

These trends provide a supportive backdrop for Shenton’s office, retail and hotel components, it added.

A property analyst said that amid global headwinds, Singapore’s commercial property market remained active.

“There is still strong demand especially within the Grade A central business district space.

“For retail, prime retail rents continue to rise recording marginal increases in the recent quarter,” he told StarBiz.

Meanwhile TA Research also said following the completion of AST2 in September, it factored in its earnings contribution and raise its FY27 to FY29 earnings forecasts by 3.2%, 4.3% and 5.4%, respectively.

FY27 reflects a nine-month contribution, while FY28 to FY29 assume a full-year contribution and 3% annual rental growth, it said adding that it has yet to incorporate the proposed IOIPG real estate investment trust and Shenton House into its forecasts.

It has maintained its target price of RM4.70 per share for IOIPG, based on an unchanged 0.95 times 2027 price to book, and a 3% environmental, social, and governance premium.

At last look, IOIPG was trading at RM3.42 apiece.