KUALA LUMPUR: IOI Properties Group Bhd’s proposed acquisition of the remaining 50.1% stake in Singapore’s South Beach development has been met with a cautious response from analysts, amid concerns that the RM2.75 billion deal may significantly increase the group’s gearing.
While the acquisition is expected to deliver strategic advantages—most notably full control of a high-profile mixed-use development in Singapore—TA Securities and Hong Leong Investment Bank (HLIB) highlighted the potential pressure on IOI Properties’ balance sheet should the transaction be fully debt-funded.
According to estimates, the company’s net gearing could rise from 0.7x to as high as 0.93x, intensifying existing concerns among investors over IOI Properties’ capital structure. HLIB emphasised that over 80% of the developer’s borrowings are denominated in Singapore dollars and are floating-rate-linked, making them highly sensitive to recent movements in the Singapore Overnight Rate Average.
TA Securities cautioned that the marked increase in gearing introduces a degree of short-term financial risk, notwithstanding a favourable outlook for Singapore’s office, retail and hospitality segments.
These concerns come on the heels of a series of acquisitions by IOI Properties last year, valued at over RM1 billion, including the Tropicana Gardens Mall, Courtyard by Marriott Penang and the W Kuala Lumpur Hotel—assets acquired from Tropicana Corporation Bhd.
Despite a recovery in April from broader global market volatility, IOI Properties’ share price remains down more than 14% year-to-date. Analyst sentiment remains broadly positive, with five out of eight covering analysts maintaining a “buy” rating, including HLIB and TA Securities. Two analysts rate the stock a “hold”, and one a “sell”. According to Bloomberg consensus data, the 12-month target price stands at RM2.47, representing an implied upside of nearly 30% from the last traded price of RM1.90.
Analysts view the South Beach acquisition as offering longer-term upside, including enhanced control over a premium asset, a strengthened recurring income base, and improved strategic positioning in Singapore’s property market.
TA Securities also suggested that IOI Properties may eventually consider listing its real estate assets via a real estate investment trust (REIT) structure, a move that could unlock asset value, deleverage the group’s balance sheet and enhance capital efficiency.
HLIB echoed this view and additionally pointed to the upcoming launch of W Residences at Marina View as a potential source of substantial cash flow, further supporting the group’s long-term capital management strategy.
-The Edge Malaysia
