I-Berhad recorded a net profit of RM19.6m (+33.7% YoY, +5.6% QoQ) for 2QFY17, bringing cumulative 1HFY17 net profit to RM38.2m (+27.3% YoY). Making up 44.2% of our full-year estimates, we continue to deem the results in line as we see stronger earnings recognitions in subsequent quarters on the back of its RM334.7mn in unbilled sales. We like I-Berhad’s value proposition and attractive location in benefitting from the urbanization of the outer Klang Valley region (Klang and Shah Alam). We reckon I-Berhad is under appreciated owing to its predominant single-location focus, but which we believe very much unwarranted given its steadily growing earnings (Figure 1) and encouraging sales numbers. Our Outperform call is affirmed with an unchanged target price of RM0.91 based on a c. 50% discount to RNAV.

• Earnings overview. In the absence of meaningful property investment and leisure-related contributions, property development continues to drive earnings growth in the interim. Divisional pretax profit of RM49.2m for 1HFY17 is 20.9% higher than the previous corresponding period’s RM40.7m, underpinned by steady construction progress of its on-going developments. The i-SOHO project was completed and handed over to purchasers in early 2Q 2017, allowing the Group to realize a portion of its unbilled sales, which in turn has ballooned its current cash-holdings to RM243.3m (c.18.5sen per share on fully-diluted basis).

• Business overview. The i-Suite development will be handed over to purchasers by Q4 2017 while the Liberty, Parisien and Hyde Towers are on track for delivery in late-2018/early-2019. The four towers have achieved combined average sales of 86%. While unbilled sales have fallen to RM334.7m as at mid-2017 from RM447.9m in the previous quarter, this does not include the recently-launched Hill10 Residences (RM120m gross development value) which saw a healthy 70% take-up rate. Marketed as one of the most luxurious properties of its kind in Shah Alam, we are encouraged by the successful sales numbers as it marks a watershed moment for property development in the area given its benchmark pricing amid reportedly lackluster operating conditions, and strongly reinforces our belief in the eventual realization of the Group’s remaining c.RM7bn GDV.

• Other developments. Structural works on the 1m sq-ft mall have reached about 70% completion and remains very much on track for a 2018 opening, providing a boost to property investment-related earnings. Works on the DoubleTree by Hilton hotel is also underway, with completion in 2019. Slated for launch this year-end or early next year, depending on certain regulatory approvals, are another 2 residential towers with estimated combined GDVs of RM520m

Source: PublicInvest Research - 18 Jul 2017