• Maintain BUY, with new TP of MYR2.10 from MYR1.46, 34% upside and c.4% FY24F (Jun) yield. 4QFY23 results were within expectations. FY23 property sales amounted to MYR1.96bn. Despite the recent round of tightening measures, the Marina View project in Singapore worth MYR8.5bn will be the major launch in FY24F. As such, we expect IOI Properties to rake in at least MYR2bn sales in FY24F. We raise our TP to reflect better market sentiment ahead, given the lifting of the political overhang post state elections.

• 4QFY23 results. FY23 revenue for the property development segment was 11% lower YoY, largely due to weaker sales in China, but this was partially offset by stronger contribution from the Johor region. The slower sequential growth in the property investment and leisure & hospitality divisions may be due to slower activities during Ramadan in April. Headline net profit in 4QFY23 was skewed by a few one-off items: i) MYR246.4m fair value gain on investment properties – mainly from IOI City Mall Phase 2; ii) MYR93.4m impairment loss on investment property – IOI offices in Palm City Jimei; and iii) MYR18.5m inventories written down – apartments at IOI International Parkhouse Xiang’an. Stripping off these items, FY23 core net profit grew 44%. Net gearing remained steady at 0.68x vs 0.70x in last quarter. A 5 sen final dividend was declared vs 4 sen last year.

• Stronger sales in 4QFY23. 4QFY23 new property sales achieved MYR590m vs MYR443m in 3QFY23. Local projects contributed 85% of the full year sales of MYR1.96bn (FY22: MYR1.93bn), while the remaining 15% was made up from the China and Singapore projects. Of the total MYR1.67bn sales in Malaysia, the Klang Valley region contributed MYR854.1m while Johor region generated MYR772m. On a full-year basis, IOIPG managed to sell MYR637.9m worth of unsold inventory. This brought the outstanding unsold inventory to MYR2.41bn (of which MYR1.17bn is from China) from MYR3.05bn in FY22.

• Launching Marina View in Oct 2023. Management has remained tightlipped on the committed occupancy of its IOI Central Boulevard Office that is going to be completed by end-2023. However, we estimate the committed occupancy to have reached around the 50% level, which should be sufficient to offset the associated interest expense. For FY24F, pipeline launches should be robust, as Marina View, with a GDV of MYR8.4bn, is slated for launch in Oct 2023. This is in addition to the usual launches in the existing townships in Malaysia.

• Forecasts. We maintain our FY24-25 earnings forecasts. Unbilled sales rose to MYR623m vs MYR554m as at 3QFY23.

• Higher TP. Our TP is now based on 55% discount to RNAV (from 65%), and includes a 2% discount given our ESG score of 2.9 for the company.

Source: RHB Securities Research - 29 Aug 2023