IOI Properties to gain from southern projects

PETALING JAYA: IOI Properties Group Bhd’s Bandar Putra Kulai township development in Johor will be a major sales driver for the property giant in the coming years, according to RHB Research.

The 25-year-old township is expected to not only see a further pick-up in industrial activity, but is also bolstered by the ongoing and upcoming developments in the surrounding area.

They include the development of the YTL Green Data Centre Park that is 30 minutes away, and a potential light rail transit station at the Senai International Airport that is 15 minutes away.

In addition, the group sold 404 acres from its non-core land in Kulai to Eco World Development Group Bhd last September for industrial development.

“All the developments will likely further create a natural demand for property in the area.

“Note that Bandar Putra Kulai achieved record sales of RM525mil in the financial year 2023 (FY23), double the RM250mil in FY22, and contributed 27% of IOI Properties’ total sales of RM1.96bil in FY23.

“IOI Properties’ FY23 sales in the Johor region have also grown from RM515mil in FY22 to RM772mil,” stated RHB Research in a note.

Given the better demand for property this year, RHB Research has maintained its “buy” call on IOI Properties but raised the target price to RM2.50 a share.

The research house pointed out that IOI Properties still has 3,474 acres of undeveloped land in the Bandar Putra Kulai township, representing 67% of its total portfolio balance.

Commenting on IOI Properties’ presence in Singapore, RHB Research noted that the IOI Central Boulevard project is set to open in mid-2024.

The project will be the property developer’s first Grade A Green Mark Platinum office tower.

Committed leases to date are at 40%, while another 20% is currently in advanced negotiation.

“These are high profile international tenants. We are confident that the take-up rate for the office space will surge when the building is closer to completion over the next few months.

“The office building will be the group’s major earnings kicker from FY25.

“Assuming an occupancy rate of 80% and given the average rental of S$13 per sq ft, the building could potentially generate RM450mil to RM480mil of rental income per year for IOI Properties,” the research house said.

Meanwhile, the mixed-development Marina View Residences project in Singapore will be launched next month, said RHB Research.

“With an average selling price of about S$3,000 per sq ft, we expect a mediocre response for the project due to the cooling measures imposed by the Singapore government last year.

“However, any sales from Marina View are expected to have a lumpy contribution given the sheer size of the project,” the research house added.

In contrast to RHB Research, Hong Leong Investment Bank Research (HLIB Research) is positive about the Marina View project.

Following an upward revision in gross development value (GDV) for Marina View to S$3.5bil, HLIB Research said that profit margins would increase.

At S$3.5bil, the GDV is 35.7% higher than the previously guided GDV of S$2.58bil.

HLIB Research named Marina View a Veblen good that targets the most affluent segment in the Singapore market.

A Veblen good is typically a status symbol or luxury good, for which demand increases as the price increases, in apparent contradiction to the normal law of demand.

“As the project is expected to be completed in the fourth quarter of 2027, with the group needing to build the W hotel on the lower floors before proceeding to the upper residential floors, the group has close to four years to build up its take-up rate and sales.

“With the upward revision in the GDV, this should bring FY24 GDV to above RM14bil, which is likely an all-time record-high launch amount for local developers,” the research house said.

Looking ahead, HLIB Research said it remains positive on the group’s prospects especially in the Singapore real estate market, led by its upcoming new office building IOI Central Boulevard and launch of Marina View Residences.

HLIB Research reiterated its “buy” call on IOI Properties with an unchanged target price of RM2.50.