I-Berhad - Keeping The Momentum

Date: 25/07/2018

Source  :  PUBLIC BANK
Stock  :  IBHD       Price Target  :  0.91      |      Price Call  :  BUY
        Last Price  :  0.425      |      Upside/Downside  :  +0.485 (114.12%)

I-Berhad reported a net profit of RM22.3m (+5.6% YoY, -8.9% QoQ) for 2QFY18 to bring cumulative 1HFY18 net profit to RM46.8m (+11.1% YoY), in line with our estimates at 52.7% of full-year forecasts, but ahead of consensus at 63.2%. Earnings growth remains intact and continues to be on an upward trajectory. We believe its relative under-appreciation, presumably on its single location focus, is unwarranted given its strong fundamentals and consistent delivery. We like I-Berhad’s value proposition and attractive location in benefitting from the urbanization of the outer Klang Valley region (Klang and Shah Alam). Our Outperform call is affirmed with an unchanged target price of RM0.91 based on a ~50% discount to fully-diluted RNAV, which in itself has scope for further upside considering the transit-oriented development status.

  • Earnings overview. Property development contributions continue to drive earnings growth. Divisional pretax profit of RM28.4m for 2QFY18 is 18.1% higher as compared to the immediate preceding quarter’s RM24.1m though a touch lower (-0.2% YoY) versus the previous corresponding period’s RM28.5m. Margins have improved owing to better sales mix and cost adjustments. The Group’s longer-term earnings visibility is secure and will be underpinned by its current unbilled sales of RM305m and increasing contributions from the 8 Kia Peng project in downtown Kuala Lumpur.
    The Property Investment portfolio, while still seeing negligible contributions in 2QFY18 with pretax losses of RM736,000 (1QFY18: -RM373,000) is poised to see a marked turnaround in fortunes in the coming financial year with the imminent opening of the mall this year-end.
    While the Group’s cash holding has fallen a fair bit QoQ, a bit of which has gone into the rapidly-concluding mall construction, overall current ratio remains a healthy and relatively liquid 2.4x with zero borrowings apart from the liability components of the unconverted ICULs and RCULs.
  • Business overview. This second half of the year will be a busy time for the Group. The three-themed Liberty, Parisien and Hyde Towers with a total of 1,217 units will be handed over to purchasers this financial quarter (90% sold on average), while the RM850m mall will also be opened in November to add another level of vibrancy to the township and augment Property Investment-related income. With no planned launches for this year, focus will still be on clearing its existing stock in iCity and 8 Kia Peng, the latter being its sole development project out of Shah Alam which continues to see encouraging sales done contrary to the reportedly lackluster market environment for higher-end properties particularly in downtown Kuala Lumpur.

Source: PublicInvest Research - 25 Jul 2018

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