IOI Prop expects stronger performance in S’pore

KUALA LUMPUR: IOI Properties Group Bhd's (IOIProp) Singapore developments should more than offset the weaknesses of its China operations, according to Kenanga Research.

The research house said IOIProp's joint venture contributions are expected to be stronger in the quarters ahead, driven by more unit sales at Cape Royale (its 65%-owned joint venture development in Singapore) as more units are released for sale upon lease expiry.

Year-to-date, 32 units of Cape Royale have been sold, out of the 302 units.

Kenanga Research highlighted that the reversal of inventories worth RM193mil in the second quarter ended Dec 31, 2022 (2Q23) which is deemed as non-core, came from Cape Royale, which has seen increased prices amidst the strong demand for Singapore properties post-pandemic.

Cape Royale was completed in 2013, which was fully kept as rental properties by IOIProp due to the weak prices dampened by multiple rounds of cooling measures implemented by the Singapore government.

While IOI Properties' China developments, with remaining gross development value (GDV), of RM1.4bil have slowed down the gap will be cushioned by its upcoming Singapore development at Marina View (GDV of RM5bil) to be launched in the financial year ending June 30, 2024 (FY24).

Meanwhile, the IOI City Mall phase two at Putrajaya that started operations in August 2022 is currently 85% tenanted, with prospects underpinned by sustained retail demand.

Also, Xiamen Mall (95% tenanted) in China, which started operations in October 2021, is expected to see increased contributions due to China's reopening in January.

"Thanks to the overall footfall recovery and the addition of the two malls, its property investment's operating profits have surpassed pre-pandemic levels in 2Q23," said the research house.

Central Boulevard Singapore, its largest investment property asset worth RM12bil, is on schedule to be completed by end-2023.

IOIProp's hospitality arm has reported its first quarterly operating profit in 2Q23 after three consecutive years of losses due to the pandemic.

"We expect such profitability to sustain, underpinned by the higher tourist arrivals and increased events going forward," said Kenanga Research.

The research house pointed out that the group's core net profit for the first half ended Dec 31, 2022 (1H23) rose 21% mainly from stronger revenue and profitability across all its business segments, thanks to broad-based recovery from a pandemic-stricken period a year ago.

The 1H23 sales of RM927mil, comprising RM797mil in Malaysia, RM102mil in China and RM28mil from 100%-owned Trilinq, Singapore, is also in line with Kenanga Research's RM1.9bil target and the group's target of RM2bil.

As of end-December 2022, IOIProp's unbilled sales stood at RM489mil.

Kenanga Research maintained its forecasts on IOIProp, as well as a RM1.60 target price and "outperform" call.

Source: The Star