IOI Properties’ Earnings Growth Driven By IOI City Mall, Property Sales – RHB IB

IOI Properties Bhd’s 1QFY24 results came below expectations, but is expected to be stronger as year-end festivities should boost income for investment properties, according to RHB Investment Bank (RHB IB).

“2HFY24F should see gradual rental contribution from IOI Central Boulevard in Singapore upon its commencement of operations.

“Its management is keeping its RM2 billion sales target, and bookings of RM335 million should provide some visibility on sales momentum going forward,” it said today in its Results Review note (Nov 27).

The research house maintains its FY24F-25F earnings, and expect the land sale to boost earnings and margin in 2HFY24F when the transaction is completed, as unbilled sales fell to MYR509 million, from MYR623 million as at 4QFY23.

It maintains its BUY call with RM2.10 TP, 22% upside and c.4% FY24F (June) yield.

“Our TP is based on 55% discount to RNAV, and includes a 2% discount given our ESG score of 2.9 for the company,” it said.

Elaborating on the group’s 1QFY24 results, RHB IB said its sequential revenue for property development declined due to lower property sales from Malaysia and China.

“However, the property investment division saw significant growth YoY and QoQ, mainly driven by the high occupancy of IOI City Mall Phase 1 and 2, as well as other retail assets.

“Headline net profit in 4QFY23 was skewed by a few one-off items including RM246.4 million fair value gain, RM93.4 million impairment loss on investment property, and RM18.5 million inventories written down. Net gearing remained steady at 0.70x vs 0.68x in the last quarter,” it said.

It noted that IOI Properties also had decent property sales in 1QFY24 as it reached RM587 million versus RM590 million in 4QFY23.

“However, the recent RM211 million Kulai land sale (404 acres) made up 36% of the total. Including the land disposal, local projects contributed 98% of the total, while the balance is from projects in China,” it said.

Bandar Putra Kulai, Taman Kempas Utama, Bandar Puteri Puchong and IOI Resort City remained the main sales contributors.

“In 1QFY24, IOIPG has rolled out MYR1.13bn worth of properties, of which RM676 million is from Conezion commercial in IOI Resort City. The overall take-up rate remains low at 36%, given the timing of launch (mainly in September).

“In the pipeline, the Marina View project will be launched in 3QFY24F, delayed from Oct 2023,” it added.

Source: Business Today