IOIPG’s 1QFY19 core PATAMI of RM156m (-37% YoY) was within expectations. Lower YoY results were mainly due to lower contributions from both Singapore and local projects, partially cushioned by higher contribution from Xiamen, China. Unbilled sales are now at 0.38x cover while new sales of RM574m is on course to meet full year target of RM2bn. Lumpy contribution from China can be expected moving forward while domestic contributions are expected to be stable. Maintain BUY rating at unchanged RNAV-based TP of RM2.25.

Within expectations. 1QFY19 revenue of RM560.1m translated into a core PATAMI of RM155.7m which was within ours and consensus full year earnings expectations at 22.1% and 22.4%, respectively.

Dividend. None (1QFY18: none).

QoQ. Revenue declined by 16.9% to RM560m due to the lower contribution from both Singapore and local developments, partially cushioned by contribution from the launching of D4 residences in Xiamen, China. Consequently, core PATAMI dropped by 18.1%, after excluding the fair value gains and forex gains/losses.

YoY. Revenue came in lower in 1QFY19 (-36.6%) on the back of minimal contribution from Trilinq project Singapore as well as lower contribution from local developments. The drop was partially offset by the higher contribution from Xiamen, China. As a result, core PATAMI dropped to RM155.7m (-21.3%), after excluding the forex gains/losses.

1QFY19 total sales of RM574m (4QFY18: RM403m) are on course to meet full year target of RM2bn with 46% of sales from local, 49% from China and 5% from Singapore. Unbilled sales improved to RM859m from RM648m in 4QFY18, representing a cover ratio of 0.38x.

Xiamen, China. The recent launch totalling Rmb 650m received strong take-up rates of over 90%, contributing positively to the profit for current corresponding quarter. We understand that there are total of Rmb 4bn of products are expected to be launched in the next two years to sustain the profit in both FY19 and FY20.

Outlook. We can expect the next lumpy recognition from China towards 3QFY19 upon the upcoming launches as the construction progress is already more than 50%. Besides, improving property investment and leisure and hospitality segments can be expected with higher occupancy rate and positive rental reversions for its malls and offices. In Singapore, we understand that management is still re-evaluating the local market sentiment deciding on the launching of its Sentosa Cove project.

Forecast. Unchanged as the Results Were in Line.

Maintain BUY with unchanged TP of RM2.25, based on unchanged 40% discount to RNAV of RM3.75. IOIPG remains a value stock with huge land bank and investment properties on the back of attractive book value at 0.5x (industry average of 0.7x), reinforced by the its maturing investment properties and a strong track record.

Source: Hong Leong Investment Bank Research - 26 Nov 2018