IOIPG’s 1HFY22 core earnings of RM343.6m (+7.2%) matched expectation. Overall, the resilient performance was attributable to higher contribution from all segments following more reopening of economy. New property sales of RM896.1m were achieved in 1HFY22, 66% stemming from Malaysia and 34% from China. RM1.1bn worth of products has been launched as of 1HFY22. 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 2QFY22 core PATMI of RM219.3m (+24.5% QoQ, +51.7% YoY), which brought 1HFY22 core earnings to RM343.6m (+7.2%) that matched our expectation (50%) and consensus (48%). 1HFY22 core PATMI sum has been arrived from reported PATMI of RM334.5m after adding back RM9.1m of EIs (mostly from fair value loss of IOI Mall Xiamen which were partially offset by gain on disposal of subsidiary).

QoQ/YoY. Revenue was higher (+6.8% QoQ; +19.2% YoY) mainly attributable to (i) higher property segment from higher progressive billings and sales prior to end of HOC, (ii) higher property investment segment from the commencement of new IOI Mall, Xiamen, and (iii) higher hospitality & leisure segment from higher room occupancy rate and patronage at the hotel’s F&B outlets following more reopening of economy. Core PATMI grew (+24.5% QoQ, 51.7% YoY) at a faster pace than topline due to higher margin from the property investment segment from lower rental relief assistance given to tenants.

YTD. Notwithstanding the lower revenue by -9.1% from lower contribution from China’s operation, IOIPG chalked in higher core PAT by 7.2% mainly due to higher share of joint ventures profit from sale of South Beach Residences in Singapore.

New sales of RM896.1m were achieved in 1HFY22, 66% stemming from Malaysia and 34% from China. For the sales in Malaysia, various existing projects in Klang Valley contributed c.40% of sales (mostly from existing township of 16 Sierra Puchong South, Bandar Puteri Puchong and IOI Resort) meanwhile Johor contributed c.20% from Bandar Putra Kulai and Taman Kempas Utama. During 2QFY22, IOIPG successfully launched products worth RM476m in Xiamen 2, RM435m in Xiamen 3 as well as RM159m in Malaysia, bringing 2QFY22 total launches to RM1.07 bn (cumulative 1HFY22 : RM1.1bn). Unbilled sales stood at RM787.3m, with a cover ratio of 0.37x.

Outlook. In Malaysia, we gathered that management is adapting its product offering to current market trend which leans towards affordability. In view of the rising cost of building materials, the group has incorporated a new business unit that is principally involved in building material sourcing and supplying to mitigate its impact. In China, the new IOI Mall Xiamen has showed a strong occupancy (92%) despite only opening towards end-Oct 2021. Both residential developments in Xiamen, namely IOI Palm City and IOI Palm International P arkhouse will also continue to contribute to the Group’s financial performance in the coming quarters. With regards to 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 operations. 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 -1SD of its 5-year mean) despite generating consistent earnings even during the ongoing pandemic.

Source: Hong Leong Investment Bank Research - 28 Feb 2022