Results

• Above Expectations: FY17 core PATAMI came in at RM964.4m, accounting for 108.2% and 108.7% of ours and consensus full year estimates, respectively.

Deviations

• Higher than expected margins.

Dividends

• A dividend of 6 sen (FY16: 8 sen) per share was declared on 15 Aug 17 (ex-date: 28 Aug 2017).

Highlights

• QoQ: Revenue increased 33.4% due to higher sales take- up for Trilinq project in Singapore. Core profit grew only by 9.9% due to higher tax expense from its China venture despite higher margins from Trilinq.
• YoY: 4QFY17 core profit surged by 42.4% driven by higher revenue growth (34.0%) across property development, property investment and leisure & hospitality divisions. Growth in property development was helped by higher sales take-up in Singapore, offset by lower contributions from Klang Valley and Johor regions.
• FY17: Core profit (+60.6%) grew in tandem with the higher revenue (+38.4%) driven by growth in property development, mainly derived from the contributions of Trilinq in Singapore, IOI Resort City and Warisan Puteri @ Sepang and Bandar Puchong Jaya.
• New property sales in 4QFY17 achieved RM658m, bringing FY17 sales to RM2.9bn, exceeding full year sales target of RM2.3bn and FY16 sales of RM2.2bn. Unbilled sales have come down to RM1.0bn (from RM1.48bn as at 3QFY17) as Trilinq project has been completed, representing a cover ratio of only 0.27x.
• Moving into FY18, earnings will continue to be supported by the international segment with the remaining unsold (14%) and unlaunched units in Trilinq as well as planned new project launches in Xiamen.
• Domestically, focus will be in Klang Valley with more projects will to be rolled out in Bandar Puchong, Bandar Puteri Bangi and its flagship IOI Resorts City in Putrajaya.
• Longer term catalyst will be drawing from the Central Boulevard project in Singapore (partnering Hong Kong Land (33%)), which is estimated to complete by 2021.

Forecasts

• FY18 and FY19 core profits are raised by 2.0% and 0.3%, respectively as we update the latest financial numbers.

Rating

BUY ↔ , TP: RM2.54 ↔

• 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 take-up rates for its projects and its strong track record.

Valuation

• TP is maintained at RM2.54 based on unchanged 35% discount to RNAV of RM3.91.

Source: Hong Leong Investment Bank Research - 29 Aug 2017