Investment Highlights

• We maintain our BUY recommendation on IOI Properties Group (IOIPG) with an unchanged fair value of RM1.54 based on SOP valuation (Exhibit 3). We make no changes to our FY21–23 net earnings forecasts.
• IOIPG registered its 1QFY21 core net profit of RM175.2mil. We deem this to be within expectations despite making up 30% of ours and consensus full-year estimates, as we expect income from hospitality and leisure segment to be lower in following quarters due to a spike of Covid-19 cases in Malaysia.
• 1QFY21 revenue grew by 22.1% while core net profit was 7.5% lower. The stronger revenue was due to higher contribution from the property development division while core earnings were dragged by an operating loss in the hospitality and leisure segment.
• The property development segment recorded a 1QFY21 EBIT of RM265mil (+31% YoY) mainly due to stronger contribution from projects in Malaysia and China. All in all, the property development division chalked up new sales of RM473mil vs. RM390mil YoY) whereby 49% was derived from Malaysia and 51% China while its unbilled sales stands at RM696.8mil as compared to QoQ’s RM607mil. Meanwhile in Singapore, the construction progress of the Central Boulevard development has resumed since August 2020, and the management is planning to catch up on lost time resulting from the circuit breaker that was imposed in April 2020.
• The property investment segment’s 3QFY21 revenue and EBIT fell by 8% and 14% to RM83.2mil and RM47.1mil respectively mainly due to rental relief assistance extended to tenants brought about by the Covid-19 pandemic. The construction progress of IOI Palm City Mall remains on schedule and business is expected to commence by midCY2021.
• The hospitality and leisure division’s 1QFY21 revenue dived by 51% to RM24.5mil while suffering a loss before tax of RM10.8mil as compared to a profit of RM5.3mil YoY due to Covid-19 pandemic.
• We make no changes to our FY21–FY23 numbers at this juncture. We reckon that the long-term outlook for IOIPG remains stable, supported by improving market conditions in China and stable local property sales. Maintain BUY with unchanged FV of RM1.54.

Source: AmInvest Research - 26 Nov 2020