Results

• Above Expectation: FY16 PATAMI surged by 21% to RM1.08bn. Core profit achieved RM600m (excluding one off gain), accounting for 107% of our full-year earnings forecast.

Dividends

• We are positively surprised by the higher dividend payout. IOIProp declared final dividend of 8 sen/share (~59% of payout), beating our expectation of 3.8 sen/share and translating to 3.3% yield.

Highlights

• YoY: 4QFY16 core profit surged by 13% driven by growth across property development, property investment and leisure & hospitality divisions. Higher property revenue was due to higher sales take-up in Trilinq and steady increase in progress work from existing projects.

• QoQ: 4QFY16 core profit increased by 77% mainly contributed by higher property sales from property development especially Xiamen, China.

• New property sales in 4QFY16 achieved RM750m (versus RM402m in 3QFY16), with major contribution from Malaysia and Singapore. FY16 sales achieved RM2.2bn (+28% YoY), exceeding full year sales target of RM1.8bn. IOIProp is targeting of RM2.3bn news sales in FY17 with overseas operations to contribute 40% of total sales.

• Domestic sales remain well received. The recent launch of Conezion at IOI Resort City has secured 50% take up rate since Apr 16 while Le Pavillion in Bandar Puteri Puchong has seen 70% sale for 1st block.

• On the international business, Phase 1 and Phase 2 of IOI Palm City in Xiamen are almost fully taken up. Given the encouraging response, IOIProp is targeting to launch a 46 storey high-end condo with total GDV of RMB1bn.

Rating

• BUY

• Positives: highly liquid proxy to property sector; large warchest 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

• IOIProp is only trading at 0.7x CY 16 P/B compared to peers at circa 1x. The higher-than-expected dividend payout should help to rerate the stock.

• TP is maintained at RM2.77 based on unchanged 35% discount to RNAV. Maintain BUY with dividend yield of 3.3%.

Source: Hong Leong Investment Bank Research - 23 Aug 2016