IOIPG’s 1QFY22 core PATMI of RM124.4m (-24.0% QoQ, -29.4% YoY) matched expectation. The group registered lower revenue and earnings attributable to adverse impact to all business segments arising from lockdown measures. New sales of RM294.7m were achieved in 1QFY22, 67% stemming from Malaysia and 33% from China. There was only a small launch of GDV worth RM25m during the quarter as management remained cautious. We expect stronger quarters ahead from higher operational activities across all segments, in line with the economic reopening. We maintain our forecast and BUY recommendation with an unchanged TP of RM1.79 based on discount of 60% to a RNAV of RM4.48.

Within expectation. IOIPG reported 1QFY22 core PATMI of RM124.4m (-24.0% QoQ, -29.4% YoY) representing 19% of our and 17% consensus forecast. We deem the result to be inline (but slightly below consensus) as we are expecting stronger quarters ahead from higher operational activities across all segments, in line with the economic reopening, as well as new recurring contribution from the commencement of IOI Palm City Mall in China. 1QFY22 core PATMI sum has been arrived after excluding RM84.4m of EIs (largely on gain of disposal of a subsidiary which owned 257.7 acres of plantation land).

QoQ/YoY. Revenue was lower (-34.4% QoQ; -34.5% YoY) mainly attributable to adverse impact to all the group’s operating segments arising from lockdown measures. Property development segment recorded lower revenue (-37% QoQ and -34% YoY) attributable to lower sales (from fewer launches) as well as lower progressive billings contribution from both Malaysia and China operations. Meanwhile, property investment segment was also impacted due to rental relief assistance given to tenants and lower occupancy rate for office towers. In turn, core PATMI declined to RM124.4m (-24.0% QoQ, -29.4% YoY) in tandem with lower revenue.

New sales of RM294.7m were achieved in 1QFY22, 67% stemming from Malaysia and 33% from China. For the sales in Malaysia, various existing projects in Klang Valley contributed c.44% of sales meanwhile Johor contributed c.21% from Bandar Putra Kulai project as well as from a newly launch phase in IOI Segamat. There was only a small launch of GDV worth RM25m during the quarter (new phase landed property in existing township IOI Segamat, Johor) as management remained cautious and continues to monitor market demand. Unbilled sales stood at RM728m which is a cover ratio of 0.35x.

Outlook. We are expecting better earnings moving forward as IOI Palm City Mall, Xiamen in China (with occupancy 70-80%) has started to contribute recurring leasing income to the Group following its business commencement on 28 Oct 2021. Both residential developments in Xiamen, namely IOI Palm City and IOI Palm International Parkhouse will also continue to contribute to the Group’s financial performance in the coming quarters. With regards Singapore projects, the recent acquisition of Marina View’s land is expected to be launched over the next 1-2 years. Overall, we believe IOIPG will remain resilient due to its diversified operation. We expect stronger quarters ahead from higher operational activities across all segments, in line with the economic reopening.

Forecast. Unchanged.

We maintain our BUY recommendation with an unchanged TP of RM1.79 based on discount of 60% to a RNAV of RM4.48. We like IOIPG given its ability to heavily outperform its peers over the past quarters during the ongoing pandemic alongside its ability to sustain strong net margins of 20-30%. We see value in the stock as it trades at a P/B valuation of 0.3x (below -2SD of its 5-year mean) despite generating consistent earnings during the ongoing pandemic

Source: Hong Leong Investment Bank Research - 26 Nov 2021