The Group reported a narrower net loss of RM3.4m in 2QFY21 as weakness in its property investment portfolio, its mall in particular, continued to weigh on performance amid movement restrictions re-imposed during the quarter. Cumulative 1HFY21 net loss of RM8.0m as compared to a net profit of RM1.6m a year ago continues to fall short of expectations, though we maintain estimates at this juncture on expectation of stronger recovery from late3QFY21 onwards. Near-term prospects of the Group are likely to remain hazy in light of the current operating challenges, though we still like I-Berhad’s longterm value proposition underpinned by a remaining ~60% of its gross development value yet to be realized. Our target price is unchanged at RM0.26 (based on an 80% discount to fully-diluted RNAV). Neutral call is also retained owing in the absence of near-term re-rating catalysts.

• 2QFY21 earnings overview. The property development segment returned to the black this current quarter with a pretax profit of RM2.2m (1QFY21: RM0.7m pretax loss) as the Group recognized earnings from construction progress for its Hill10 project, while also recognizing sales of its latest development. Property unbilled sales is a healthier RM48.6m as at endJune (Mar 2021: RM40.4m). Losses in the property investment (mall) and leisure segments continued to weigh however, with movement restrictions re-imposed during the period.

• Business overview. The Group has maintained a prudent stance on launches amid the pandemic, and continues to work on reducing its inventory levels which remains at a relatively high RM832.1m. Net gearing is at a low 5.1% though we note that bank borrowings have risen to RM104.7m as compared to RM48.8m as at end-December 2020. On an encouraging note, its BeCentral serviced apartment tower which has yet to be officially launched, anticipated by 4QCY21, has already seen sales recognized in its books, reflecting still-healthy reception to its product offerings. The most recent launch was the Hill10 Residences back in 2018. Its Grade-A GBI-rated office tower is anticipated to see notable pick-up in occupancy by 4QCY21, with meaningful financial contributions expected from FY22 onwards.

• Outlook. Near-term earnings risks will continue to come from its mall and leisure-based operations amid weak consumer sentiment. Our forecast assumes a property launch this year. Upside to earnings could come from quicker-than-expected turnarounds in Property Investment and Leisure segments, with further excitement coming from plans for the development of its 2 new data centers (of 100,000 square feet each).

Source: PublicInvest Research - 26 Aug 2021