Yo....How?

StarBiz: IOI Corp Bhd expects minimal disruption to its group operations following the resignation of group executive director Datuk Yeo How, which will take effect end-July. A company spokesman said Yeo, had been instrumental in ensuring there was a strong management team and good corporate culture. “Besides, group executive director Datuk Lee Yeow Chor, who oversees the group's operations, is also familiar with the areas covered by Yeo. “Hence there should be minimal impact on group operations as his impending resignation had already been discussed awhile back,” she told StarBiz yesterday. On Tuesday, IOI Corp announced Yeo would be leaving the group to pursue a new career. It was learnt Yeo could have accepted a job offer by a Singapore-based plantation group.


Credit Suisse Research said in a note to clients yesterday IOI Corp's valuation premium was affected on concerns over Yeo's departure.
It said the “delicate balance” between executive chairman Tan Sri Lee Shin Cheng's entrepreneurship and Yeo's good capital management and corporate governance would be affected. It downgraded IOI Corp to underperform from outperform and cut its target price to RM7 from RM10.


I believe CS’s down grading is way too drastic. The research outfit cuts practically 30% of their earlier target price due to the departure of Yo, er sorry, Yeo. Sure, the new person taking over him must be a super efficient and experienced guy but how would you quantify the 30% cut. Is the calculation like this?: IOI is basically helmed by 3 main Executive Directors or "Pillars"(Tan Sri Lee, Yeo and Lee Yeow Chor). So each person’s contribution would be 30%. Could CS’s drastic downgrading due to its earlier wrong call for IOI at RM10.00 and now to save face…..just whack it to RM7.00 without raising investors’ queries?


However, the IOI Corp spokesman described Credit Suisse Research's comment and inference as unfair to the company and Yeo for his efforts in putting systems in place over the years. Other analysts said although there might be a momentary spike in the IOI's share price, it was unlikely to be permanently impacted by this news. RHB Research Institute said any knee-jerk reaction in IOI Corp's share price should be temporary, given that there was no change in substantial share ownership and Tan Sri Lee was still the main driver of the business. “Yeo's personal shareholding in IOI Corp is only 0.01% and less than 0.01% for IOI Properties Bhd, so we don’t expect any potential major selldown of Esos (employee share option scheme) shares,” it said in a report.


Yes. Yeo has approximately 712,500 shares in IOI and 4,000 shares in IOIP, ie roughly over RM5 m in value.


RHB Research said Tan Sri Lee would already have someone in mind to replace Yeo and a likely candidate would be Yeow Chor, his eldest son who has been on the board since 1996. It maintains its outperform call with a fair value of RM9.35 per share.


True. Yeow Chor could be the candidate, but can he takeover all this functions from Yeo who has been overseeing finance, commodity marketing and palm based manufacturing for all these years? Yeow Chor’s plate is already full (involved in 4 core business sectors: 1)oil palm plantations, 2)oleo chemical manufacturing, 3)specialty fats and oils and 4)property development and investment) unless some of his existing job functions are passed over to the other ED which is Tan Sri Lee’s brother. This man’s job function in IOI is not clear as it was not mentioned at all in the 2007 Annual Report???


IOI Corp closed 10 sen down at RM7.10. It was the most active counter with 13.52 million shares done.


There were initially two questions in my mind when I saw the news yesterday. I hurriedly typed IOI’s share and asked myself whether there were any impact on the share price and IOI's management from Yeo's departure. The computer screen at that time shows the share price was down 10 sen only at RM7.10. With regard to management, I would say IOI has lost a very valuable asset of the company which may take a while to be replaced. This Malaysian CFO of the year holds 3 very important positions in the Group. He overseas the Group’s finance, commodity marketing and palm based manufacturing business units. As such, his resignation from the company would definitely be felt in many years to come and hopefully IOI will be able get another replacement as capable as Yeo soon.

I was then curious to know “Why would a 51 years old man who is the top 3 guy in this award winning plantation company and who has served the company for last 24 years think of resigning?" Although the reason given was “pursue a new career in a Singapore-based plantation group”, it give rise to other more bigger questions. Why did he choose another plantation based company? Are there any unresolved internal conflicts or is it because he felt bored with the challenges in IOI that he would love to experience bigger challenges? Or is he not paid enough? I am afraid only Yeo and IOI would be able to answer them. For your information, Yeo gets on average RM120,000 per month for his work. (Tan Sri Dato Lee gets RM1.83 mil per month while his son Yeow Chor gets RM120,000 per month-Fees, Bonuses, BIK, EPF and other benefits. Source: 2007 Annual Report)



* Isn’t it ironic?…Yeo joined IOI in 1983. According to IOI’s Annual Report, IOI Group’s business within a short time span of 24 years since 1983 has grown tremendously. The Group’s operating profit for 1993 was RM500 m and has now turned into RM2.2b in 2007. Does Yeo brings good fortune to the company too? Will IOI’s fortune remains as good as before?

*AFP: Central Banks in Indonesia, Philippines, South Korea and Taiwan have been reported to be selling USD to prop up their own currencies lately in a bid to fight inflation stemming from the surging oil prices. This stance is a direct opposite strategy from before where the countries weakened their currencies to boost export of their goods.

*SET falls biggest in 4 months by 2.64% yesterday to closed at 833 pts as foreign investors fled the market mainly on growing apprehension about the country’s political instability. Will we be considered a risky political destination one day or are we already one now based on the political tension we are currently facing?

*Indonesia will quit OPEC soon as they are now a net importer of oil. Daily production for the country is 927,000 bpd while consumption is 1,250,000 bpd. As a comparison, Malaysia’s production and consumption is 750,000 bpd and 500,000 bpd.

*China may allow foreign investors to buy/sell its commodities futures via the expansion of the QFII program soon.