Ioi Corporation Case Study
1. IOI strong growth was achieved through
a. Good plantation management practice
- Continues improvements on yields performance
- Maximize output from plantation and factories and minimize input to achieve a low-cost supply chain
b. Diversified business base in palm oil industry, from downstream sector to upstream sector
2. IOI opportunities and threats
c. Opportunity
- Continues growth on palm oil in edible oils & fats market globally
- Increase in non-food industry demand, like biofuel.
Now, market is focus on renewable energy. Palm oil has been identified as one of the efficient and clean biofuel
- Crude palm oil price getting higher and stable year-on-year.
- Sales of properties at prime area especially in Singapore have been encouraging
- Expansion in Indonesia with recent planting permit approval to the group’s directly owned plantations d. Threat
- Major revenue is come from export markets to Europe and US. Weak economic situation affect the demand on palm oil. With limited land bank in Malaysia
- Unfavorable weather condition
- Shortage of estate workers
- Fierce competition from Sime Darby and Indonesia and upcoming markets like Africa and Brazil are catching up
3. Internal organization capabilities and it weakness.
- e. Top 3 executive directors are family members. Decisions making are among family members, higher chances in power abusing and lack of transparency f. Has operations in many countries, expose to foreign exchange risk
4. Change and unchanged
g. Change Family based share holders lack of transparency. Need to maintain good relationship with stakeholders to increase the efficiency of the group h. Unchanged
- Tissue culture research, leading to cultivation of clonal palms with superior traits
- Continuous improvement in productivity and efficiency of its operations
- Sustainable environmental friendly practices
IOI Financial Analysis
FY2012 1. Current liquidity ratio = Current asset / Current liability 2012 (RM’000)| 2011 (RM’000)| 9,185,620 / 2,202,499= 4. 7| 7,703,105 / 2,288,028= 3. 36| The group ratio increased in year 2012
2. Total debt to total asset = (short term debt + long term debt) / total asset 2012 (RM’000)| 2011 (RM’000)| 10,148,965 / 23,064,868= 0. 44| 7,393,721 / 19,655,119= 0. 37| Total funds that are provided by creditors is increasing in year 2012
3. Total asset turnover = Sales / total asset 2012 (RM’000)| 2011 (RM’000)| 15,640,272 / 23,064,868= 0. 67| 16,154,251 / 19,655,119= 0. 82| 4. Profitability = net income / sales 2012 (RM’000)| 2011 (RM’000)| ,828,529 / 15,640,272= 0. 11| 2,290,513 / 16,154,251= 0. 14| After tax profits decreased per ringgit of sales
5. Market value * EPS = 0. 2785 * P/E = 18. 2047
Price per share = 5. 07
(Current assets – current liabilities) / ordinary shares = (9,185,620 – 2,202,499) / 6,419,174 = 1. 08
Fair value = (5. 07 / 2) + (1. 08 / 2) = 2. 535 + 0. 54 = 3. 075 IOI group’s profit is decreased on year 2012. The market fair value is much lower than the actual price per share. The option is to sell the share instead of buying it.
