Valuation For IOI Properties Remains Attractive At 74% Discount

IOI Properties FY22 earnings are slightly above expectations, core net income of RM715m came in slightly above expectations, making up 108% of consensus estimates. The slight earnings surprise could be attributed to the lower-than-expected expenses in 4QFY22. No dividend was announced for FY22.

Sequentially, 4QFY22 core net income increased to RM201.5m (+18.2%qoq) mainly due to lower operating expenses and higher contribution from joint ventures. That brought FY22 core net income to RM715m (-10.6%yoy). Core net earnings were lower in FY22 despite a higher topline (+4.1%yoy) as earnings in FY21 were high base, boosted by contribution from JV in Singapore. Meanwhile, the operating profit of the property development division was higher, driven by higher sale of properties in Malaysia and higher contribution from projects in China.

Similarly, the operating profit of the property investment division improved on the back of contribution from leasing income from IOI Mall, Xiamen, and higher rental income from its shopping malls in Malaysia. FY22 new property sales at RM1.93b. IOIPG reported new property sales of RM616m in 4QFY22, higher than new property sales of RM418m in 3QFY22. That brought total new sales to RM1.93b in FY22, lower than new sales of RM2.3b in FY21. New property sales in FY22 were 77%
contributed by projects in Malaysia while the remaining 23% were contributed by projects in China. On the other hand, unbilled sales increased to RM605m in 4QFY22 from RM537m in 3QFY22, providing less than 1year of earnings visibility to the property development division.

In this respect, MIDF maintains a BUY call on the stock with an unchanged TP of RM1.29. Earning forecast for FY23F was revised by +2.8% after factoring in lower expenses. MIDF also introduce its earnings forecast for FY24. TP for IOIPG is unchanged at RM1.29, based on 68% discount to RNAV. The valuation of IOIPG is also attractive, trading at steep discount of 74% to the latest NTA of RM3.71 per share.

Source: Business Today