IOIPG reported 1QFY21 core PATMI of RM175.2m (-0.4% QoQ, -0.2% YoY), which was above expectations largely due to higher than expected sales recognition from China. Management has yet to officially announce the FY21 sales and launch targets for now as they are still assessing the situation. New sales of RM473m were achieved in 1QFY21, with 49% stemming from Malaysia and 51% from China. With regards to launches, RM640m were carried out with 70% in Malaysia and 30% in China. Unbilled sales stood at RM562.8m, w hich is a cover ratio at 0.34x. We raise our FY21/22/23 forecasts by 8.5%/9.1%/10.8% respectively and maintain BUY with a higher TP of RM1.10.

Above expectations. IOIPG reported 1QFY21 core PATMI of RM175.2m (-0.4% QoQ, -0.2% YoY), forming 33.5% and 30.5% of our and consensus full year forecasts, respectively. The results were above expectations largely due to higher than expected sales recognition from China. 1QFY21 core PATMI sum has been arrived after excluding +RM16.9m of EIs (net forex gain).

Dividends. None declared.

QoQ/YoY. Revenue rose +8.1%/+22.1% to RM175.2m due to higher progressive billings recognition from the Property Development segment. However, core earnings remained relatively flat at RM175.2m (-0.4%/-0.2%) due to a lower product margin recognition despite the increase in revenue.

New sales of RM473m were achieved in 1QFY21, with 49% stemming from Malaysia and 51% from China. With regards to launches, RM640m were carried out with 70% in Malaysia and 30% in China. Unbilled sales stood at RM562.8m, which is a cover ratio at 0.34x.

Outlook. Looking forward, management has yet to officially announce the FY21 sales and launch targets for now as they are still assessing the situation. In China, IOIPG still has over RMB3bn worth of products which will be launched over the next 2 -3 years. Despite the thin cover ratio, projects in China are generally launched once construction progress is at least 50%, which in turn directly translates into earnings (upon conversion of bookings to sales). We gather that the market in China is still healthy at this juncture, therefore allowing the company to continue generating sales.

Forecast. We raise our FY21/22/23 forecasts by 8.5%/9.1%/10.8% respectively after imputing stronger launches and sales in its projects in China as we were on the conservative end.

Maintain BUY with a higher TP of RM1.10 (from RM1.05) based on an unchanged discount of 75% to a RNAV of RM4.32 as we impute the changes in our earnings and rollover our valuation base. We see deep value in the stock as it is priced at a P/B valuation of 0.29x (below -2SD of its 5-year mean) despite generating consistent earnings during the ongoing pandemic.

Source: Hong Leong Investment Bank Research - 26 Nov 2020