Highlights

We met with management and came away feeling upbeat about its sales and earnings outlook for FY15:

Targeting 20% sales growth... IOIPG achieved its RM2.0bn sales target in FY14 and is aiming for 20% growth in sales in FY15, on back of RM3-4bn worth of launches. This translates to RM2.4bn sales target for FY15, coming from: (1) RM700m sales in Johor, mainly focused on its affordable landed townships in Kulaijaya; (2) RM200m sales from Singapore, where its Trilinq @ Clementi is already more than 50% sold; and (3) The balance RM1.3-1.5bn sales to mainly come from Klang Valley, with key FY15 launches being Bangi and Sepang (for more project details, please refer to our report dated March 4th, 2014).

... without factoring in China. Interestingly, we learnt that China could be partially lifting its cooling measures, which could include allowing developers to start selling houses at a much earlier stage of construction. We understand IOIPG is awaiting confirmation of this policy shift before confirming its FY15 launch plans for Xiamen. With Park Bo Bay already fully launched, future sales will come from the 44-acre IOI Palm City (RM2.5bn GDV)

IOI City mall updates. The mall is on track to open end-2014 and is already 85% tenanted at average rental of RM6-7psf, and has secured reputable tenants such as Parkson and Tesco Premium.

LRT excitement in Puchong. IOIPG has more than 90 acres of remaining landbank in Puchong, which are situated near 4 LRT stations along the extension line, where selling prices could be boosted by as much as 50% in our view. This also bodes well for its investment assets in PFCC (Puchong Financial Corporate Centre) and PFCC South.

Risks

Has 28% exposure to China and Singapore in terms of GDV, making it sensitive to any external slowdown and forex fluctuations.

Forecasts

Maintained.

Rating

BUY

Positives: highly liquid proxy to property sector; large war-chest for landbank acquisitions; has exposure to Singapore and China property markets; enjoys vast and cheap landbank.

Negatives: Could face sector headwinds in Malaysia, while the Singapore and China property markets are also currently at the low point of their cycles.

Valuation

Maintain TP at RM3.94 (10% discount to RNAV, 17.3x CY15 P/E) as we anticipate strong re-rating for IOIPG when the Singapore and China markets come into their upcycles.

Source: Hong Leong Investment Bank Research - 27 Aug 2014