HLIB Research maintains 'buy' call for IOI Properties Group, TP RM3.60
KUALA LUMPUR: IOI Properties Group Bhd reported a core profit after tax and minority interest (PATAMI) of RM120.6 million, which brought the financial year's (FY24) sum to RM638.1 million.
Hong Leong Investment Bank Bhd (HLIB Research) said the results were below its consensus' expectations, making up 88.6 per cent and 90.3 per cent of full-year forecasts, respectively.
"The negative deviation in results was due to weaker-than-expected performance from its joint venture (JV) as well as weak China sales," it said in a note today.
The firm noted that IOI Properties achieved a strong headline figure for FY24, largely due to the revaluation of its investment properties.
This revaluation highlights the value of the group's assets, especially IOI Central Boulevard (IOICB) and IOI City Mall.
"For IOICB, we understand that the group will start expensing the interest from the first quarter of financial year 2025 (1Q25).
"The occupancy rate of the building is currently at 50 per cent with a target to increase this to 80 per cent by end-calendar year 2024. With this, we expect IOICB to be loss-making in the first half of 2025 (1H25) and only turn profitable in the second half of 2025 (2H25)," it added.
HLIB Research said that despite the losses, it could be mitigated by the sale of Melaka land, which is expected to generate an estimated gain of RM70 million in Q1 2025, alongside a rebound in the hospitality sector.
It also said that the group's property investment and hotel assets would benefit from a reduction in the Imbalance Cost Pass-Through (ICPT) rate by 1 sen per kWh for commercial electricity tariffs.
"Property development segment in Malaysia is also expected to improve in FY25 given that the group had put a sizable amount of new products in the market recently," it adds.
HLIB Research has cut its FY24/25 forecast by 5.0 per cent and 1.4 per cent respectively, as it imputes a lower contribution from IOICB factoring in higher interest expenses.
The firm has maintained its 'buy' call with an unchanged target price of RM3.60.