Results

• Above Expectations: 4QFY15 core PATAMI (exclude fai r value gain of RM225m) double YoY, bringing FY15 full year core profit to RM487m, accounted for 125% and 117% of ours and consensus full year earnings forecast, respectively.

Deviations

• This is mainly driven by strong sales recognised from the IOI Palm City, Xiamen and reversal of interest expenses.

Dividends

• Declared dividend of 6 sen/share.

Highlights

• FY15 revenue grew 31% yoy on the back of increased revenues from all its business segments. FY15 core profit after excluded RM404m fair value gain on investment property surged 26% YoY.

• In 4Q15, property development revenue grew by 46% mainly contributed by Triling project in Singapore and IOI Palm City in Xiamen. Phase 1 for Palm City was launched in May 15 with GDV of RMB550m and has achieved strong take up rate above 80%. Given the overwhelming response, IOI Prop is targeting to launch its second phase in 2QFY06/16.

• IOI Prop achieved new property sales of RM700m in 4QFY15 (3QFY15 sales: RM390m) bringing full year sales to RM1.7bn, inline with management target. Unbilled sales YTD stood at RM1.58bn, representing 1x of FY15’s property development revenue.

• Back by its solid balance sheet with net gearing of less than 0.1x, the company is capable of raising its dividend payout while building landbank to sustain its property development. Given well established track record in township development even in midst of economic downturn (as seen in 1997-1998) and its solid balance sheet, we believe the company will be able to withstand current headwinds in property sector. Coupled with current valuation at deep discount to its RNAV of RM3.50 per share, we believe the stock warrants a re-rating.

Risks

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

Forecasts

• Unchanged.

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

• TP remained unchanged at RM2.27 based on unchanged 35% discount to RNAV. Maintain BUY.

Source: Hong Leong Investment Bank Research - 28 Aug 2015