Investment Highlights

• We initiate coverage on IOI Properties Group (IOIPG) with a BUY recommendation, pegging a fair value of RM1.88 based on SOP valuation (Exhibit 6). We expect the company to register core net earnings of RM677.3mil, RM699.2mil and RM728.0mil for FY19, FY20 and FY21 respectively.

• IOIPG is one of the largest property developers in Malaysia with a proven track record spanning more than three decades in property development. Its principal activities are: (i) property development; (ii) property investment; and (iii) hospitality and leisure.

• For FY18, its property development division contributed 81% of the group’s revenue and 61% of its PBT. At present, IOIPG has landbank of approximately 10,000 acres in various locations such as Malaysia, Singapore and China bearing a total estimated GDV of over RM60bil. The property development in China and Singapore is expected to deliver strong contributions to IOIPG in the short to medium term due to strong take-up rates.

• IOIPG’s property investment portfolio comprises mainly retail and office space with total net lettable area (NLA) of approximately 6.7mil sq ft. This division contributed 12% of IOIPG’s revenue and 18% of its PBT for FY18. Its main investment properties include IOI City Mall, Putrajaya, IOI Malls (Puchong, Selangor and Johor Bahru), One and Two IOI Square, Putrajaya, Puchong Financial Corporate Centre and IOI Boulevard Puchong. Meanwhile, Central Boulevard in Singapore is in the pipeline with construction of the main building expected to commence by 4QFY19. Going forward, IOIPG’s property investment division will be enhanced by the completion of: (i) 1.5mil sq ft of retail and office area at Central Boulevard, Singapore in 2022; and (ii) 2.37mil sq ft of retail area in a shopping mall at IOI Palm City in Xiamen, China in 2020/2021.

• IOIPG’s hospitality and leisure portfolio consists of hotels, resorts and golf courses located in Klang Valley, Johor and Singapore, namely Putrajaya Marriott Hotel; Sheraton Puchong; Palm Garden Hotel; Palm Garden Golf Club (PGGC); IOI Palm Villa Golf and Country Resort; Le Méridien Putrajaya; and JW Marriott Hotel Singapore. This division made up 7% of IOIPG’s revenue and 3% of its PBT for FY18. The company’s hospitality and leisure earnings will be boosted by the addition of a 360-room 5-star hotel at IOI Palm City in Xiamen, China by the end of 2021.

• We believe the outlook for IOIPG is positive anchored by a strong contribution from its property development projects, particularly in China and Singapore, stable income from property investments and its growing leisure and hospitality business.

Source: AmInvest Research - 2 Apr 2019