I-BHD - 8 Kia Peng’s Take-Up Rate Improves Slightly

Date: 25/07/2018

Source  :  RHB-OSK
Stock  :  IBHD       Price Target  :  0.57      |      Price Call  :  HOLD
        Last Price  :  0.305      |      Upside/Downside  :  +0.265 (86.89%)

Maintain NEUTRAL on I-BHD, with new MYR0.57 TP from MYR0.52, 13% expected total return. We believe 2Q18’s stronger-than-expected earnings will be positive to its share price over the near term. New sales and unbilled sales have grown YoY. The outlook for the property market is still uncertain, however, so some pipeline launches may be held back this year, in our opinion.

1H18 net profit of MYR46.8m beat. Revenue improved 10.9% YoY, due to higher recognition of sales from construction in progress. Earnings improved 11.1% YoY mainly due to a lower effective tax rate, given the over provision of deferred tax in the prior year and cost adjustment as a result of the changes in national tax regime.

Better new sales numbers. During the quarter, I-BHD achieved MYR75.7m in new sales (vs MYR53.1m in 2Q17), mainly due to higher sales from the Hill 10 and 8 Kia Peng projects. It recorded cumulative new sales of MYR145.6m YTD, on track to meet its full-year target of MYR280-350m. With growing sales, unbilled sales stood at MYR305.4m, 12% higher from the previous quarter. Management expects unbilled sales to grow this year, on increased sales contribution from 8 Kia Peng.

Hill 10 almost fully booked. Hill 10 Residence, the only project launched last year, achieved an encouraging take-up rate of 94%. Despite hefty prices, we believe the good take-up rate is mainly from the upcoming mall – Central Plaza @ i-City – slated for completion in 4Q18. However, in view of challenging property market conditions, we think some pipeline projects eg Hill 11 residence (GDV of MYR278m), Hill 12 residence (GDV: MYR281m) and Smart Office (GDV: MYR230m) may be held back this year.

8 Kia Peng saw some improvement. We believe I-BHD’s performance over the near term will be heavily dependent on the 8 Kia Peng project, as billings from Hill 10 are still slow. 8 Kia Peng was launched in early FY16, and the take up rate has improved to 20% (vs 12% in 1Q18). We expect sales to grow this year, with the booking rate at 25%. Given the slow take-up, construction progress has been slow, and it has only reached 38% completion (targeted for completion by end-2019).

We raise our FY18-20 earnings forecasts by 6%, 2% and 3%, due to higher billings from 8 Kia Peng. FY19F-20F earnings could be flat due to a lack of launches this year.

Maintain NEUTRAL, with higher TP of MYR0.57, using a lower discount to RNAV of 55% (from 60%) as we believe the higher-than-expected earnings will be positive to the share price over the short term.

Source: RHB Securities Research - 25 Jul 2018

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