Investment Highlights

• We maintain our BUY recommendation on IOI Properties Group (IOIPG) with a slightly higher fair value of RM1.89 (from RM1.88) based on SOP valuations (Exhibit 2). We raise our FY19–21 forecasts by 3.5%, 3.3% and 3.2% respectively to reflect the timing of revenue recognition.

• IOIPG’s 9MFY19 core net profit of RM544.1mil (+48.1% YoY) came in above expectations at 80% and 79% of our and consensus full-year estimates respectively. The stronger earnings were mainly contributed by: (i) property development in China; and (ii) higher share of profit in JVs mainly arising from the sale of South Beach Residences in Singapore.

• The property development segment recorded a 9MFY19 EBIT of RM507.1mil (+14.3% YoY) as a result of higher profit contribution from its development projects in China. The property investment segment remained stable, with a 9MFY19 EBIT growth of 2.3% to RM209.5mil.

• IOIPG is planning to launch RMB1bil worth of projects in 4QFY19 with the main focus in Xiamen, China. The previous launch of properties in Xiamen back in September 2018 has seen positive results as the properties were almost fully taken up within a day.

• We revise our FY19–21 forecasts upwards by 3.5%, 3.3% and 3.2% respectively to reflect the timing of revenue recognition, mainly driven by property development projects in China and Singapore. Meanwhile, the upcoming investment properties in IOI Palm City, Xiamen, comprising 2.37mil NLA of retail and office are progressing well and are scheduled to be completed in stages from 2020. Also, the 1.5mil sq ft of retail and office area at Central Boulevard, Singapore scheduled for completion in 2022 will provide additional revenue for the investment properties division moving forward.

• 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 - 28 May 2019