Results

• Within Expectation: 1QFY17 PATAMI surged by 64% YoY to RM190m, accounting for 25% of our and consensus full-year earnings forecast.

Dividends

• None.

Highlights

• YoY: 1QFY17 core profit surged by 64% driven by growth across property development, property investment and leisure & hospitality divisions. Higher property revenue was due to higher sales take-up in Singapore and Xiamen coupled with steady increase in progress work from existing projects.

• QoQ: Revenue was flat but core profit fell by 4.4% mainly due to lower profit margin from property development segment (EBIT margin for property development declined from 36% to 28%).

• New property sales in 1QFY17 achieved RM731m (versus RM750m in 4QFY16) accounting for 32% of full year sales target of RM2.3bn. The news sales were contributed mainly from Singapore (49%) followed by Malaysia (31%) and China (20%). Higher sales from Singapore were due to stronger sales from Trilinq.

• Domestic sales remained well received. The recent launch of third block of Conezion at IOI Resort City has secured 30% take up rate in a month while Le Pavillion in Bandar Puteri Puchong has seen 70% sale.

• On the international business, Phase 1 and Phase 2 of IOI Palm City in Xiamen have been almost fully taken up. Recently, IOIProp has launched 30 units of condo (a 46 storey high-end condo with total GDV of RMB1bn) with encouraging take up rate of >50%.

• To recap, IOIProp recently proposed a renounceable rights issue to raise RM1.5bn to fund the acquisition of land in Marina Bay. In the short term, we are negative on the above exercise given the dilution of EPS (-20%) and RNAV per share (-8%).

Rating

HOLD ↔

• We like IOIProp for its strong track record in township development but we are concerned about immediate EPS dilution (due to the recent proposed right issue) and subdued sentiments for property outlook in Singapore and Malaysia.

Valuation

• TP is maintained at RM2.54 based on unchanged 35% discount to RNAV of RM3.90.

Source: Hong Leong Investment Bank Research - 23 Nov 2016