I-Berhad reported its strongest quarterly core numbers in five years with a 3QFY24 net profit of RM12.9m (+152.9% YoY, +123.5% QoQ) [3QFY22 saw a higher headline net profit though was lifted by a one-off gain]. Cumulative 9MFY24 net profit of RM22.5m (+180.5% YoY) is ahead of expectations at 114% of full-year estimates. The notably better financial performance continues to be underpinned by the Leisure and Hospitality segments which we had previously under-estimated, but which is also the premise we are adjusting FY24-FY26 profit expectations higher by ~60% on average for. More positive factors appear to be lining up - the Group is seeing encouraging sales numbers for its current development, the investment properties are registering higher occupancies while the Leisure offerings are gaining significant traction. Scope for longer-term upside is still attractive with ~50% of its gross development value (RM5bn) yet to be realized. We retain our Trading Buy call with an unchanged target price of RM0.32 (~50% discount to book value).

• 3QFY24 overview. Property development revenue of RM27.8m (+63.3% YoY, +19.2% QoQ) follows through from the preceding quarter's momentum, with more advanced billing stages in the ongoing BeCentral residential and 8Premier corporate/retail lots underpinning the improved performance. BeCentral Tower 1 is currently 60% sold, while the recently-launched BeCentral Tower 2 is 22% sold. Unbilled sales are slightly higher at RM93.3m as at end-September (end-June: RM90.0m). The corporate office tower nearing full tenancy, stronger renewal rates in its data center and the Central iCity mall reaching ~90% occupancy has made a more significant mark on the performance of the Group's investment property portfolio, with a revenue of RM5.9m (+1.2% YoY), and pretax profit of RM3.8m (+32.4% YoY). Cumulative 9MFY24 revenue and pretax profit are RM17.7m (+4.0% YoY) and RM40.5m (+81.2% YoY) respectively. The Leisure and Hospitality segment is the current anchor of the Group, with sustained revenue contribution of RM27.4m (+30.1% YoY, +7.2% QoQ) and pretax profit of RM6.3m (+>100% YoY, +50.6% QoQ) as its newly-introduced attractions gaining significant traction. Improved visitation to the Group's theme parks and hotels were also due to school holidays and various public holidays in the current reporting quarter.
• Business overview. Management appears to have pivoted its current focus toward building and strengthening its investment and leisure/hospitality portfolios, which is expected to consequently have cascading effects on its development pipeline. We see the merits of this shift considering that the recovery in the high-rise commercial and residential segment appears to be slower in finding its footing, though extraction of full value will still be contingent on the development portfolio.

Source: PublicInvest Research - 19 Nov 2024