The Group saw a slow start to the new financial year with a reported 1QFY22 net profit of RM1.4m (+>100% YoY, -52.2% QoQ), and the current quarter continuing to be underpinned by steadier performance in the Leisure segment. The Group’s property investment segment is making inroads into becoming a more notable income contributor meanwhile, with more significant financial numbers expected in the latter part of FY22. We continue to keep forward estimates unchanged on expectation of stronger overall performance this coming year, with all 3 key segments seeing traction in its recovery momentum. We like I-Berhad’s long-term value proposition underpinned by a remaining ~60% of its gross development value yet to be realized. We retain our Neutral call however as we wait on more concrete signs of earnings recovery, though we also note that this is very likely trough valuations for the Group, with scope for upsides now appearing increasingly attractive. Our target price is unchanged at RM0.26 (based on an 80% discount to RNAV).

• 1QFY22 earnings overview. The property development segment recorded revenue of only RM4.3m for the quarter, mainly from the recognition of sales from its latest project, BeCentral, albeit still at the early stages of development. Pretax losses of RM2.1m were reported however, largely due to finance costs. Unbilled sales, for the first time in a while, are starting to climb again (sustainably, as well) and are currently a higher RM50.9m as at end-Mar (Dec 2021: RM39.3m). The property investment segment reported higher revenue for the quarter as a result of higher occupancy in its corporate office tower, Mercu Maybank. The Group’s leisure segment remains the star performer, for now at least, with revenue of RM9.3m (+171.8% YoY) and pretax profit of RM3.3m (+>100% YoY), despite it being a seasonally weaker period.

• Business overview. The Group’s maiden corporate officer tower is almost fully-tenanted, with the Maybank Group now an anchor tenant. The DoubleTree by Hilton remains slated to open its doors by July or August this year, adding another dimension to the Group’s investment-related income. The combination of these, in addition to the Central i-City mall in the vicinity, are expected to attract various other financial institutions, fintech companies, multinational corporations and technology companies to the area, strengthening the segment further in the near to medium term.
  On a separate note, the Group has also recently announced a proposal to extend the expiry (due in August this year) of its Redeemable Convertible Unsecured Loan Stocks (RCULS) for a further 5 years. With the COVID- 19 pandemic weighing on the property market, and share prices in general, this move makes sense considering the cash consideration (RM201m) needed to redeem the RCULs., which would likely be better used (for now) to drive recovery of its earnings prospects.

Source: PublicInvest Research - 31 May 2022