Investment Highlights

• We maintain our BUY recommendation on IOI Properties Group (IOIPG) with a potential upside of 33% to our unchanged fair value of RM1.83/share, based on a 40% discount to its RNAV. This also reflects a neutral 3-star ESG rating (Exhibits 8 & 11).

• Following a recent engagement with the company, we have raised our FY21–FY23 earnings forecasts by 10%, 12%, and 22% respectively to reflect improved earnings visibility from both the local and China segments. Key highlights are as follows:

1. The group maintains its FY21 sales target at RM1.8bil, which is flat YoY. On the local front, the group remains prudent on new launches while simultaneously developing the existing 13 townships, particularly 16 Sierra in Puchong and IOI Resort City in Putrajaya. We think this is achievable since its 1HFY21 has already reached RM916mil, half of its FY21F sales target. This is further supported by 2QFY21 unbilled sales of RM477mil. As the Home Ownership Campaign (HOC) is scheduled to end next month by 31 May 2021, management has observed an uptick in terms of booking rate and sales.

2. Expect flattish FY21F–FY23F contributions from China’s development.

I. In Xiamen, the company is at the tail end of developing IOI Palm City, which has a remaining gross development value (GDV) of RMB1bil (RM0.6bil). On top of that, high-rise and landed residential properties under the Xiamen 2 project that was launched with a GDV of RMB800mil in April 2020 have been fully sold.

II. The Xiamen 3 project, which is being currently developed in phases under IOI Palm International Parkhouse, has reached a construction completion rate of 60–80%. The remaining estimated GDV of RMB1.8bil (RM1.3bil) mainly consists of condominiums and commercial development.

Source: AmInvest Research - 22 Apr 2021