I-Berhad reported a marginal RM0.7m in headline net profit for 1QFY23 (-52.8% YoY, -91.9% QoQ), with the current quarter seeing a notably higher effective tax rate (60.5%) and the immediate preceding quarter lifted by fair value gains recognized from its investment properties. Though behind our estimates at only 4% of full-year numbers, we leave forecasts unchanged on the expectation of stronger recognitions from both its development and investment segments in the quarters ahead. Sales momentum remains encouraging, albeit limited (only one ongoing project at this juncture). Scope for longer-term upside is still attractive with ~60% of its gross development value yet to be realized, timing notwithstanding. While we still like I-Berhad’s long-term value proposition, we retain our Neutral call as we look towards further earnings consistency. Our target price is unchanged at RM0.26 (based on a significant 80% discount to RNAV and ~60% discount to book value).

• 1QFY23 earnings overview. The property development segment recorded revenue of RM17.1m (+>100% YoY) as it continued to recognize sales from its latest project, BeCentral residences, and from completed residential units, the i-Suite and Hyde projects. Incidentally, the first tower of BeCentral is already 42% of sold (of its total 474 units), with the Group also currently working on the Twenty8 and 8Premier corporate/retail spaces. Segment pretax profit of RM0.7m (+>100% YoY) is mainly due to the recognition of cost savings for completed projects. Unbilled sales continue to inch higher meanwhile, currently at RM94.5m as at end-Mar (Dec 2022: RM87.3m).
  The property investment segment reported higher revenue of RM5.7m (+76.7% YoY) due to higher occupancy in its corporate office tower, Mercu Maybank, with segment pretax profit also higher at RM1.0m (+47.8% YoY).
  The leisure segment continues to record notable jumps in revenue (+>100% YoY) to RM20.6m, with the Double Tree Hilton hotel contributing strongly following its opening in 3Q last year. Ongoing start-up costs for the hotel continues to be a drag on segmental pretax earnings however (-76.6% YoY to RM0.8m).

• Business overview. The Group will continue to generate sales from its ongoing BeCentral residences, a project comprising two residential towers with a gross development value (GDV) of RM600m, in addition to corporate/retail spaces in the vicinity (named Twenty8 and 8Premier). RM10m has also been allocated toward new attractions at its Theme Park for the enhancement of visitors’ experiences, in preparation for stronger tourist arrivals expected in the coming months.

Source: PublicInvest Research - 31 May 2023