• 1Q16 results review. In 1Q16, IBHD’s net earnings s urged 50% yoy to RM15.4m, driven mainly lower effective tax rates and a 6.8% rise in sales from the existing projects such as i-SOHO, i-Suite, Liberty and Parisien Towers, the advancement of the construction progress coupled with positive contributions by the Best Western i-City hotel. QoQ, IBHD registered a 8.6% increase in revenue, mainly due to higher revenue recognition of on-going projects for the Property Development division. However, net profit was 2.3% marginally lower due to easing revenue and profit before tax from both the Leisure and Property Investment division, as the Leisure division had attained its peak seasonal revenue in 4Q15 due to the year-end school and festive holidays whilst the Property Investment division had a once-off fair value gain of RM1.5m on the revaluation of the investment properties.
• Anticipate strong earnings and dividend payout in FY16-17. Consensus are expecting IBHD to chalk up robust earnings CAGR of 93% from FY15-17, underpinned by positive growth from both the Property Development and Leisure segments coupled with RM745m unbilled sales as at 1Q16 (RM553m in 1Q15). In Marc h 2016, IBHD l aunched “8Ki a Peng @ KLCC”, a RM880m GDV luxury high -end residential project (50-storeys tower with 440 luxury serviced apartments and 2 penthouses) built on a 1.05-acre freehold parcel on Jalan Changkat Kia Peng, KL. On top of that, the Group also unveil the RM268m “Hyde Tower” (a 43 -storeys residential tower with uninterrupted views over the Central i -City Shopping Centre).
• By end of 2016, the Group plans to launch the “Central Towers” developments. Central Towers is a development with approximate GDV of RM1.1bn which comprises an office tower, two residential towers, the Double Tree by Hilton hotel, a convention centre and a performing arts centre. Overall, IBHD expects that the unbilled sales will continue to grow as seen from the encouraging sales of its on-going projects and the recent launch of the Hyde Tower. Given its buoyant outlook, consensus are expecting DPS to escalate from 1.5sen in FY15 to 5 sen in FY17 (assuming average 25-30% payout).
• Poised for a LT downtrend line breakout to revisit RM0.575-0.63 zones. Following a 4% jump yesterday amid a strong 1Q16 resul ts, we believe IBHD is ripe again to launch another wave of uptrend to stage a breakout above the LT downtrend line of RM0.525 from 52-week high of RM0.695 (15 Jul 15), supported by the uptick in oscillators. A decisive breakout above RM0.525 could take the next leg up towards RM0.55 (38.2% FR) and RM0.575 (50% FR) before retesting our LT objective at RM0.63 (76.8% FR). On the flip side, key supports are RM0.50 and RM0.49 (9 & 23 May lows). Cut loss at RM0.485.
• Positives risk to reward ratio with 21.1% upside against 6.7% downside. IBHD is currently trading at 5.8x FY16E P/E and 0.6x P/B, about 32% and 25% lower against its peers, respectively. All in, we see an attractive risk to reward ratio for investor with a theoretical entry price of RM0.52 given that the downside to the cut loss zone of RM0.485 is 3.5 sen (-6.7%) while the upside to the LT price objective of RM0.63 is 11 sen (+21.1%).
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Source: Hong Leong Investment Bank Research - 26 May 2016