Results

• Below Expectations: Ibraco’s 1H17 core PATAMI of RM6.4m accounted for 18.2% and 20.8% of HLIB and consensus full year forecasts, respectively.

Deviations

• Due to slower stage of completions and progressive billings.

Dividends

• None.

Highlights

• QoQ: Revenue grew by 17.2% due to the recognition of TT3 commercial properties. However, core profit declined by 9.6% given the negative tax expenses due to deferred tax adjustment during 1Q17.
• YoY: Revenue fell by 63.2% as key revenue contributing projects were at near completion stages coupled with lower sales of property in the absence of new launches last year. Meanwhile, core profit declined by 73.3% in tandem with lower revenue and higher cost.
• YTD: Core net profit declined by 67.2% on the back of 58.5% drop in revenue as key revenue contributing projects were at near completion stages coupled with higher staff cost and depreciation charges.
• The key contributing projects include residential houses at TT2, condominiums at the Park Residence, apartments at Stutong Heights, shop offices at TT3 and Bintulu Town Square Phase 1, shop lots at Bintulu Town Square.
• During the quarter under review, Ibraco achieved a sales of RM43m (YTD sales: RM229m), on course to meet FY17 target of RM350m.
• A combined GDV worth of RM30.2m in TT3 and Bintulu Town Square has been launched during the quarter. The 123-acres development in Northbank (GDV: RM1.5bn) is expected to be launched in phases commencing end of the year.
• Moving forward, we expect stronger numbers towards 4Q17 from the progressive recognition of its healthy unbilled sales of RM290.8m (RM302.9m in 1Q17), which represents a healthy cover ratio of 1.8x on top of construction order book of RM302.6m.

Risks

• Delay in planned launches and weaker sales.
• Execution and operational risks.

Forecasts

• We delay the recognition of ongoing projects resulting in lower FY17 core profit by 16.0% but higher FY18 core earnings by 10.4%.

Rating

BUY ↔ , TP: RM1.00 ↔

• Maintain BUY rating underpinned by strong 3-year earnings CAGR of 42% and healthy unbilled sales of 1.8x, supported by above industry average margin and attractive dividend yield at 4%.

Valuation

• Our TP is maintained at RM1.00 based on total RNAV of RM1.53 and unchanged 35% discount on RNAV for property segment.

Source: Hong Leong Investment Bank Research - 28 Aug 2017