IOI Group Berhad - A classic fundamental investment gem

Results and Rewards

Many consider the IOI group now to be one of the best managed companies in Malaysia and one of the pre-eminent palm oil companies in Malaysia if not the world, as can be seen by its market capitalization of RM19 billion today as compared to its market capitalization of approximately RM 250 million in 1992.

If you had invested RM 1000 in IOI shares back in 1992 and kept the stock until today, it is now worth RM 28,722 or a return of 2872 % over 15 years or at an annual rate of return of 27 % every year. A stellar return by any standard!

Clearly, Crude Palm oil (CPO) price cycles do not have a direct relationship with the share price movements of IOI in the past 15 years. The main reason for IOI group share price rise could be attributed to performance results.

Why didn't everyone invest in IOI back then?

With hindsight, we can all agree that the “thrills” of a good investment certainly exist in the IOI group price performance and here are a few reasons why some investors missed out on the IOI group's meteoric rise:

• Not many (then and now) have the patience and discipline to learn and practise the art of fundamental investing;
• Finding a diamond in the rough (meaning a potential great company when it is still small) is never easy. It certainly requires research and hard work too;
• In the case of the IOI group, the palm oil plantation business was not “sexy” when CPO prices were stagnant in the early 90's;
• Sticking through with the company during the Asian financial crisis was a challenge, even though it is a well managed company;
• Most importantly, many lacked the faith and patience in the long term strategy and management of the IOI group in the past 15 years.

Those investors who had the patience and discipline to stick with the IOI group are certainly rewarded handsomely today!

Management, Management, Management!

Management plays the most critical role in the progress of a company. A good management team must have the leadership and foresight to implement strategies and steer the company through the worst of times.

Having achieved stellar performance and returns over the years, the IOI group could have been satisfied and remained complacent but not under the wings of Tan Sri Dato' Lee and his team. The continuous search for improvement, excellence and shareholder returns are entrenched in the company and this is the reason why the IOI group has soared in the short span of 15 years to be a “blue chip” and a much admired company even on the global stage.

All said, the IOI group is indeed an excellent example of fundamental investing that offers great returns for investors.