Results

• Above Expectation: 9MFY17 core PATAMI came in at RM277.6m, accounting for 92.4% and 82.2% of our and consensus full-year earnings forecast.

Deviation

• Higher sales and revenue recognition for Trilinq project.

Dividend

• None

Highlights

• QoQ: Revenue dropped 25% due to seasonal weaker 3Q sales. Nevertheless, core profit improved by 23% due to higher margin on the back of slower recognition of expenses after excluding the one-off RM164m expenditure on additional buyer's stamp duty (ABSD) with interest for Trilinq.

• YoY: 3QFY17 core profit (excluding fair value gains of RM7.4m and the above mentioned one-off ABSD charges ) surged by 149% driven by growth across property development, property investment and leisure & hospitality divisions. Higher revenue (+39%) was due to higher sales take-up in Singapore and Xiamen coupled with steady increase in progress work from existing projects.
• YTD: surge in core profit (+72%) was on the back of higher revenue (+40%) driven by growth across all segments mainly derived from the contribution of Trilinq in Singapore, IOI Resort City and Warisan Puteri @ Sepang.
• The ABSD with interest of RM164m (additional 10 per cent levy on the land cost of SG$408m plus 5% interest) is recognized on the Trilinq project due to the Singapore ruling that developer must complete and sell all the units within 5 years.

• We gather that Temporary Occupation Permit (TOP) for Trilinq has been obtained in April and handover of units are being carried out currently. The remaining unsold and yet to launch units can then being recognized in revenue subsequently upon sale.

• Unbilled sales stand at RM1.48bn as at 3QFY17. New property sales achieved was RM662m (versus RM795m in 1QFY17), bringing YTD sales to RM2.2bn, on pace to exceed full year sales target of RM2.3bn.

Forecast

• We accelerate the recognition from Trilinq project as it has obtained the TOP. Consequently, we raise our FY17 & FY18 core profit forecasts by 18.8% and 17.5%.

Rating

• BUY

• We upgrade IOIProp to BUY as we see value emerging post the dilutive rights issue exercise in 1QCY17, on the back of attractive book value at 0.7x (industry average of 1.0x), reinforced by the improved sales and take-up rate for its existing projects and its strong track record.

Valuation

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

Source: Hong Leong Investment Bank Research - 24 May 2017