Company analysis of IOI Properties Group Berhad

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3.1 BUSINESS INFORMATION SECTION

3.1.1 BACKGROUND INFORMATION

IOI Properties Group Berhad (“IOIPG”) is one of top public-listed property developers in Malaysia. IOIPG also is the property arm of IOIC, one of the largest plantation and resource-based manufacturing companies listed on the Bursa Malaysia’s Main Market. IOIPG was incorporated in Malaysia under Act on 25 February 2013 as private limited company under the name of IOI Properties Group Sdn Bhd for the purpose of facilitating the Internal Reorganisation. IOIPG is one of Malaysia’s largest property companies with a record spanning more than thirty years in the property development industry. Its principal activities include property investment, property development, hospitality and leisure.

IOIPG’s commercial buildings are designed to meet the Green Building Index (“GBI”) to act as a socially-responsible property developer. IOIPG is bestowed several accolades by leading publications and organisations and ranked among the top developers in Asia such as BCI Asia, FIABCI, Asia Pacific Property Awards, The Edge Malaysia, and the Building and Construction Authority (“BCA”) in Singapore. The IOIPG’s Organisation Chart

3.1.2 PROSPECTS OF THE INDUSTRY OR SECTOR CONCERNED

Pursuing core expertise which is the design and development of townships

The Malaysian property market outlook is envisaged to remain positive and favorable in the near term as transactions in the residential and commercial sectors are estimated to reach between approximately RM127.2 billion to RM165.1 billion by 2015.

Pursuing niche development in matured areas

Leveraging on IOIPG’s extensive experience as a property developer, we have successfully further enhanced product portfolio by undertaking the development of standalone mid to high-end commercial or residential properties located at prime locations or within matured townships. IOIPG deem this market to be niche development. By explore niche development; IOIPG may potentially enter joint development with reputable developers and suitable business partners to develop these projects.

Growing property investment portfolio

IOIPG’s investment properties provide company with a steady stream of recurring income. Therefore, the company aims to grow the revenue contribution of property investment portfolio. In addition, IOIPG will identify new developments and existing properties depending on the location, prospects, occupancy rate and the rental income or yields.

Increasing presence in Singapore and China

Despite government measures to cool down the property market in PRC, IOIPG believe that the increasing urbanization rate, population growth, and increasing household income particularly in the second tier-developed cities such as Xiamen, will provide sustained demand for company’s properties. Similarly in Singapore, despite the increase in Additional Buyer’s Stamp Duty and other cooling measures implemented by the Singapore government, the demand for properties in the property market remains on upward trend, spurred mostly by population growth rate and growing demand for properties from the middle-income households. From the statement above, IOIPG increase ventures and projects in Singapore and China.

3.1.3 TYPE OF PRODUCTS OR SERVICES SOLD

Property Development

IOIPG are an established township developer with a track record spanning more than two decades in the property development industry. Over the years, the company has successfully developed comprehensive self-contained townships, comprising amongst other. The company aim to emulate this successful development formula of building and growing a self-contained township for all township developments. IOIPG has also further enhanced product portfolio by participating in the development of standalone mid to high-end commercial or residential properties located at prime locations or within matured townships by leveraging on company’s extensive experience as a property developer. The company deems this market to be niche development.

Property Investment

IOIPG also lease out the properties, which comprise mainly of retail space and office building. These properties were mostly developed by IOIPG to complement existing township developments and supplement company’s revenue with stable and recurring rental income.

Leisure and hospitality

  1. Marriott Putrajaya Hotel
  2. Palm Garden Hotel
  3. Palm Villa Golf & Country Resort

Plantation

IOIPG’s plantation lands are mostly located in the fringe of growing and established township as well as growth corridors, measuring approximately 6,916 acres. These plantation lands are intended for company’s future property development activities. As most of development plans are still in the initial stages, the Board may from time to time, review and revise the layout planning and development plans subject to market conditions and depending on the growth and maturity of the surrounding area.

3.1.4 CUSTOMERS AND SUPPLIERS

Major customers and principle markets

IOIPG principle markets are Malaysia, Singapore and Xiamen, PRC. For the past 3 years, the company does not have any customers contributing 10% or more of Group’s revenue.

Major suppliers or contractors

IOIPG engage the services of consultants and main contractors to assist in development operations. The company does not typically purchase construction materials from suppliers or engage the services of sub-contractors directly.

The table below shows company’s purchases of services, which accounted for at least 10% or more of company’s total purchases of services for the past 3 FYE 2011, 2012 and 2013.

Name/ Services rendered

Length of

Proportion of Group’s Purchases

Relationship

FYE 2013

FYE 2013

FYE 2013

(Years)

(%)

(%)

(%)

Yical Construction Sdn Bhd

8

4.97

13.98

10.23

Kimlun Sdn Bhd

10

13.06

13.38

3.82

Jasmumi Construction Sdn Bhd

8

4.55

9.05

7.94

Translegend Holdings Sdn Bhd

11

3.32

7.40

2.92

The company generally does not wholly depend on any one consultant or main contractor. The company selects the consultants and main contractors based on various factors such as pricing, track record, financial strength, workmanship, quality, efficiency, reliability and staff capacity.

3.1.5 TECHNOLOGY, PRODUCTION METHODS AND DISTRIBUTION CHANNELS ADOPTED

Modes of marketing / distribution / sales

IOIPG being an established township developer, company has built corporate image through timely delivery of properties with proven quality. As the company has a diversified product portfolio, marketing strategies tend to vary according to the types of products offered. In Malaysia, the company has an internal marketing team that focuses on strategic banding activities as well as providing input during the design development process to ensure the design of properties meets stringent design criteria.

As for sales activities, company has dedicated sales team located at head office and showroom at major project sites to promote new launches. Furthermore, company deploy printed media, private previews, email and short messaging service blasts, electronic directly mailing as well as social media sites to market view launches.

In Singapore, company leverage on joint venture partners’ experiences, contracts and reputation in Singapore to successfully market projects. Discussions on pricing strategy are also carried out with joint venture partners prior to product launch.

3.1.6 COMMERCIAL ASPECT

Franchise

Through IOIPG’s subsidiary, Resort Villa Development, company entered into a franchise agreement and an international service agreement with International Hotel Licensing Company S.A.R.L. to operate Marriott Hotel in IOI Resort City for a period of 15 years. Subsequently, International Hotel Licensing Company S.A.R.L. had assigned all its right, title and interest in and to the franchise agreement together with the International services agreement to Global Hospitality Licensing S.A.R.L.

Brand name, Patent and License

The current “IOI” logo which company intends to use in operations has been trademarked by IOIC. Company entered into a License Agreement with IOIC to obtain the rights to use the “IOI” brand name and such logo prior to the Listing

Research and Development

The nature of IOIPG’s business does not require us to carry out any extensive research and development. Hence, company has not incurred any research and development expenses for the past 3 latest financial years. In order to remain competitive, company strives to continuously improve product design, quality of properties and services in leisure and hospitality business by constantly keeping abreast with the market trends and conditions.

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