Research houses maintain Buy call on IOI Properties following FY22 solid result

KUALA LUMPUR: Research houses have maintained a "buy" stance on IOI Properties Group Bhd (IOIPG) following the group's financial year ended June 30, 2022 (FY2022) solid results despite the challenging landscape.

IOIPG full-year net profit increased to RM686.74 million for FY2022 from RM660.21 million registered a year earlier while revenue was higher by four per cent to RM2.59 billion versus RM2.49 billion previously.

In a research note today, Hong Leong Investment Bank (HLIB) maintained the buy call with an unchanged target price (TP) of RM1.54 per share.

HLIB said the result was within expectations, whereby commendable results this quarter mainly stemmed from recovering footfall in malls which cushioned the weaker property sales from China.

"We believed the group's well established strategy of spreading property development in Malaysia, Singapore and China should help to mitigate the near term weakness in China's property market.

"In addition, the opening of IOI City Mall Phase 2 as well as the upcoming completion of Central Boulevard should provide the group with stable recurring income. The launch of this new phase is just in time to capture the recovering footfall to retail malls in Malaysia," it shared.

MIDF Research also maintained its buy call on IOIPG with an unchanged TP of RM1.29 per share.

The research house said that IOIPG FY2022 core net income of RM715 million came in slightly above expectations, making up 108 per cent of MIDF and consensus estimates and the slight earnings surprise could be attributed to the lower than expected expenses in the fourth quarter of FY2022.

"We maintained the call on IOIPG as we see better earnings outlook for the group, driven mainly by investment properties division and turnaround of leisure and hospitality segments.

"The valuation of IOIPG is also attractive, trading at a steep discount of 74 per cent to the latest net tangible assets (NTA) of RM3.71 per share," it noted.

Meanwhile, AmInvestment Bank Bhd maintained its buy stance on IOIPG with a lower fair value of RM1.52 per share from RM1.55 per share citing that the lower valuation stems from lower FY2023 to FY2024 forecast earnings due to higher effective tax rate assumptions.

"We are concerned about the sales of IOIPG's ongoing projects in China given the 32 per cent year-on-year slump in China's property sales for January to June 2022. In August 2022, the People's Bank of China lowered the five-year loan prime rate (LPR) by 0.15 per cent to 4.30 per cent and the one-year LPR to 3.65 per cent from 3.70 per cent to boost the property market.

"Notably, the one-year LPR serves as the reference rate for the majority of the new loans in China. Although the easing of monetary policy may provide near-term relief to homebuyers, we remained cautious on China's property market due to tighter COVID-19 curbs and still fragile demand," it added.

Source: New Straits Times