Investment Highlights

• We maintain our BUY recommendation on IOI Properties Group (IOIPG) with an unchanged fair value of RM1.89 based on SOP valuations (Exhibit 2). We make no changes to our FY20–FY21 earnings forecasts, and introduce FY22 net profit forecast at RM776.2mil.

• IOIPG’s FY19 net profit of RM661.3mil (-12.3% YoY) came in within our expectations but below consensus at 91% of full-year estimates. Revenue fell by 17.7% mainly due to lower contribution from the property development segment. The higher PBT (+6.9%) is contributed by development projects in China, and a higher share of profit in joint ventures mainly arising from the sale of South Beach Residences in Singapore. However, net earnings fell by 12.3% mainly due to higher taxation. IOIPG recorded new sales of RM1.93bil in FY19, RM53.3mil higher than FY18 mainly contributed by sale of development projects in IOI Palm City, China.

• The property development segment recorded a FY19 EBIT of RM613mil (+7.9% YoY) as a result of higher profit contribution from its development projects in China. The property investment segment remained stable, with a FY19 EBIT growth of 6.6% to RM207.9mil.

• IOIPG is planning to launch projects worth 2.9bil yuan in GDV in FY20 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 make no changes to our FY20–FY21 earnings forecasts, and introduce FY22 net profit forecast at RM776.2mil. Meanwhile, the upcoming investment properties in IOI Palm City, Xiamen, comprising 2.37mil NLA of retail and office are progressing well, and 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 remains 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 - 30 Aug 2019