Higher Core Earnings

IOIPG posted a 17% yoy increase in core net profit to RM717m in 9M17 (9M16: RM614m), which was above market and our expectations. Core net profit made up 85% and 77% of consensus and our estimates of RM843- 928m. However, net profit declined 55% yoy to RM121m in 3Q17 due to RM164m one-off stamp duty cost. All its business segments, i.e. property development, hospitality and investment segments saw higher earnings. We maintain our earnings forecasts. We reiterate our BUY call with a RM2.26 target price, based on a 40% discount to RNAV.

3Q17 Core Earnings Increased by 38% Yoy

IOIPG reported 55% yoy decline in net profit to RM121.1m in 3Q17 mainly due to one-off stamp duty cost of RM163.9m incurred for its Trilinq project. Excluding this one-off costs, fair value gain (RM7.4m) and forex gain (RM20.7m), IOIPG achieved core net profit of RM264.5m (+38%yoy) in 3Q17. For 9M17, core net profit of RM717.4m made up 85% and 77% of consensus and our estimates of RM843-928m.

Higher Revenue Contribution From All Business Segments

For 9M17, revenue jumped 40% yoy to RM3bn (RM895.8m in 3Q17), driven by the surge in property development (+44% yoy), hospitality (+38% yoy) and property investment (+8% yoy) revenue. Higher sales take-up rate for its international projects (Trilinq, Singapore and D3 Residences, Xiamen) and domestic projects (IOI Resort City and Warisan Puteri @Sepang) with steady increase in progress billings have supported its revenue growth. Hospitality revenue was lifted by the commencement of operations for Le Meridien by Starwood in August 2016. But operating profit fell 5% yoy (3Q17:RM2.9m) due to competitive pressures in the hotel segment and lower golfing activities for Palm Garden Club. Higher occupancy and rental rates drove property investment revenue growth.

Maintain BUY With TP of RM2.26

We maintain our earnings forecasts as the property market remains subdued in 4QFY17. We maintain our 12-month target price of RM2.26, based on 40% discount to RNAV. Maintain BUY. We believe that unbilled sales of RM1.62bn as at end-2016 will support its revenue in FY17-19E. Key risks are higher financing costs for its new land in Singapore and a prolonged downturn in the domestic property market.

Source: Affin Hwang Research - 24 May 2017