Results

• Below expectations: 1HFY18 core PATAMI came in at RM363.3m, accounting for 39% and 39.2% of ours and consensus full year estimates, respectively.

Deviations

• Slower-than-expected launches and progressive billings.

Dividends

• Nil.

Highlights

• QoQ: Revenue decreased 18.7% due to the completion of Trilinq project in Singapore back in FY17. Core PATAMI was down by 14.1% in tandem with lower revenue after excluding the impairment loss of RM79.7m due to revaluation.
• YoY: 2QFY18 core PATAMI down by 31.2% given the significant lower profit contribution from development projects in Malaysia and China as well as lesser units remaining for sale in Trilinq.
• YTD: 1HFY18 core PATAMI was down by 14.5% due to lower contribution from property development in both Singapore and Xiamen, partially cushioned by higher contribution from property investment division.
• New property sales in 1HFY18 achieved RM1.1bn (2Q18: RM448m), on course to achieve full year target of RM2.8bn. Unbilled sales improved to RM1.3bn (from RM930m in 1QFY18), representing a cover ratio of only 0.34x.
• We are expecting a stronger 2H18 with Rmb2bn worth of GDV from Xiamen 2 that is expected to launch towards the end of FY18, a booster to earnings.
• Domestically, focus will be in Klang Valley with more projects to be rolled out in its growing township in Bandar Puchong (Cruise Residences, GDV: RM300m), Bandar Puteri Bangi (The Strata Townhuse, GDV: RM150m), Bandar Puteri Kota Warisan (Ayden Townhouse & Service Apartment, GDV: RM420m), Sierra 10 (Service Apartments, GDV: RM110m) and others.

Forecasts

• FY18/19 earnings are cut by 5.3% and 0.1%, respectively as we delay our launch assumptions.

Rating

BUY ↔ , TP: RM2.50 ↓

• IOIPG is a value stock with huge land bank and investment properties on the back of attractive book value at 0.6x (industry average of 1.0x), reinforced by the improved take- up rates for its projects and its strong track record.

Valuation

• TP is reduced to RM2.50 (from RM2.54) based on unchanged 35% discount to RNAV of RM3.84.

Source: Hong Leong Investment Bank Research - 26 Feb 2018