Investment Highlights

• We maintain our BUY recommendation on IOI Properties Group (IOIPG) with an unchanged fair value of RM1.52 based on SOP valuation (Exhibit 1). We make no changes to our FY21–23 net earnings forecasts.

• We recently spoke with IOIPG management who updated us on its latest development. Here are the key takeaways:
  
  (i) IOIPG launched its Xiamen 2 project worth about RMB800mil in GDV back in April 2020 which saw a take-up rate of over 80%. At present, construction progress has reached 80%, and we believe the company will see higher revenue recognition in 1HFY6/21. To recap, the Xiamen project has a total GDV of RMB5.1bil (remaining RMB3.3bil) and is scheduled for completion in CY21.
  
  ii) On the local front, the Alanis Block D (402 units) at Kota Warisan, which was launched in February 2020, has recorded a take-up rate of more than 50%. Meanwhile, the Alanis Block C which was launched in September 2019 is almost sold out. The Alanis project comprises four 32–35 storey towers (A, B, C & D) with a total 1,255 units. With built-ups ranging from 441sq ft to 926 sq ft, these are priced from RM227K (RM378 psf); with a total GDV of RM412mil.
  
  (iii) IOIPG is still assessing the current market condition, especially in the local market; and has not revealed any plan for new launches in the next 6 months. Meanwhile, the key focus for IOIPG is clearing its completed inventories with aggressive sales and marketing strategies.
  
  (iv) The property investment division, which was impacted by the movement control order (MCO) in 2HFY6/20, shall see improvement in 1HFY6/21 given the diminishing rate of Covid-19 infections in Malaysia.
  
  (v) Meanwhile, the hospitality and leisure division, which registered an operating loss of RM27.1mil in FY20, will see a longer recovery period given the cross-border travel restrictions at the moment.
   
• We retain our FY21–FY22 numbers at this juncture. We reckon that the long-term outlook for IOIPG remains stable, supported by improving market conditions in China.
   
• Our valuation is unchanged at RM1.52 per share based on SOP valuation (Exhibit 1); implying forward PERs of 15.0x, 14.3x and 15.3x for FY21, FY22 and 23 respectively. We view the recent selldown on the stock as a buying opportunity with a potential upside of about 60%. Maintain BUY.

Source: AmInvest Research - 15 Sept 2020