IOI could be a good BUY

IOI has dropped 76% from its peak of RM8.60 (recorded in January 2008) to its recent low of RM2.08 on October 28 (last Tuesday). This is in line with the 70%-drop in CPO prices during the same period.

IOI (closed at RM2.25 yesterday) is now trading at a P/Book of 1.6 times) or 6.4 times its earning for FY2008 (of 35 sen). I will not try to estimate IOI's earning for FY2009, which could easily be lower than half its FY2008 numbers. More importantly, I can see that IOI's financial position is fairly healthy, with current ratio at 3.1 times while gearing ratio is moderate at 0.64 times (based on its Balance Sheet as at 30/6/2008). Its cash in hand is very high at RM2.9 billion.

The share price of IOI has been hammered in the past few days because of rumor of forex losses. This has since been confirmed to be true, but the actual loss of RM130 million is much lower than speculated. For more on this, you can go to here, here & here.


Chart: IOI's weekly chart as at October 29, 2008 (source: Quickcharts)

Based on the huge drop in share price, I believe that IOI is now an attractive stock for long-term investment.