A meeting with the heir apparent for the first time

Yeow Seng is the younger of the two sons. He is involved in both the plantations and property businesses, while his brother takes care solely of the properties.
He will become more involved with investor relations now that Yeo How has departed.

He completed a law degree in the UK, worked at a bank in Singapore for one year and has been working at IOI for 5 years, under the watch of both his father and Yeo How.

My view of him: he is thoughtful, humble and knows the businesses well.

Some of his views:

IOI remains relatively bullish on prices - forecasting prices of RM3,300/t for this year and 2,800-2,900 in 2009.

Previously it was selling forward aggressively, often six months forward; now, it is holding back expecting prices to rebound somewhat from here.

It has largely sold forward at RM3,000/t average to November this year.

On supply/demand, thinks supply from Indonesia is a concern, but demand should hold up due to China/India consumption.

Thinks Malaysian supply will deteriorate next year after a great 2008. Due to cycle of trees and their yields.

Believes biofuels to stay in US and Europe; won't be any change in policies.

Fertiliser costs are up 30% YoY and account for 40% of overall costs. Mostly bought from Russia and China in US$.

On the property side, he expects margins to decrease by 10% going forwards.

Surprisingly, he is seeing a pickup in Johor property sales (they have a township next to the airport).

In Singapore, they are ready to launch their first development in Sentosa, but waiting for the market to get better.

Consists of 150 high end condos. Paid S$460m for land, equivalent of S$1,360/sqf. Construction costs were S$460/sqf. Hoping to get S$2800/sqf for the 3,700 sqf units.

2nd parcel of Sentosa land cost S$1,800/sqf, which he estimates is around the current price.

Foreign shareholding in IOI is now 25-30%.

Best regards,

James Gruber

CLSA Malaysia