IOI Property remains RHB Research's top pick as it continues to drive earnings in the coming quarters

KUALA LUMPUR: IOI Properties Group Bhd's (IOI Prop) second quarter (Q2) financial year 2023 (FY23) results beat expectations due to the opening of IOI City Mall Phase 2 and the reversal of inventories previously written down, RHB Research said.

Further, the bank-backed research house said IOI Prop remains its top pick for the sector as its property investment division will continue to drive earnings in the coming quarters.

The research firm said that completing IOI Central Boulevard in Singapore towards the end of 2023 should be another kicker to earnings from FY24 onwards.

RHB Research said new property sales achieved RM478 million from MYR448.6 million in Q1 FY23, bringing the first half of 2023 (1HFY23) total to RM926.6 million.

On the Malaysian front, the firm said IOI Resort City and Bandar Puteri Puchong primarily contributed sales from the Klang Valley region (RM473.4 million). At the same time, Bandar Putra Kulai and Taman Kempas Utama drove sales in Johor (RM305.5 million).

"IOI Prop maintains its RM1.9 billion sales target, and the company's projects in Xiamen are likely to pick up again in 2HFY23, given the reopening of China at the end of 2022," it said.

RHB Research expects the new IOI City Mall Phase 2 and other retail malls in the portfolio to perform even better in 2HFY23, driven mainly by the Lunar New Year and upcoming Aidil Fitri festivities.

Meanwhile, the firm said IOI Central Boulevard Towers in Singapore is on track to be completed by the end of 2023, and its leasing prospects remain encouraging, given the strong demand from technology companies in the region.

IOI Prop's Marina Bay site is now undergoing development planning for the mixed residential and hotel components.

"We raise FY23 earnings by 15 per cent to reflect the reversal of impairment. Maintain Buy with RM1.40 target price on the stock," it added.