i-Berhad (i-Bhd), the master developer of i-City @ Shah Alam, has been keeping a low profile over the last few years. Now it is ready to reap the fruits of its labour as most of i-City's major infrastructure works have been completed. The group will be realising i-City's extremely conservative GDV of RM3.0b over the next eight years (we reckon its real potential GDV  is much higher at closer to RM5.0b). We are estimating strong FY12-13E earnings growth of >100% each to RM11.4m'RM24.3m. Our TP of RM1.51 is based on a 65% discount to our SoP RNAV of RM4.32. Our applied discount is higher than the maximum discount applied to developers under our coverage of 52% due to 1) its small market capitalisation of RM86m, 2) tight liquidity given the 61.2% shares held by the owner and 3) its single project exposure risks. NOT RATED. 

Master developer of i-City @ Shah Alam. The company develops, manages and invests in i-City, which spans 72ac in Shah Alam alongside the Federal highway. It enjoys MSC status and is one of the few large freehold land banks in Shah Alam. iBhd has signed a management and development agreement with the State Government of Selangor for the development of i-City as a Technopreneur Campus for 21 years. Incentives granted to the company include 1) Temporary Occupation License for c.30ac of neighbouring land; 2) approved 24 hours operation for approved outlets; 3) a lower Bumi sales quota of 30% and 4) an increased plot ratio of 5.0x from 3.0x, which nearly doubled the allowable GFA to 13.0m sf. The project enjoys strong accessibility and will soon see a flyover interchange with direct and exclusive access to Federal Highway as well as an LRT extension to service i-City. 

i-City's GDV of RM3.0b is conservative, based on <RM400psf ASP. While this is management's current guidance, we believe the total GDV will eventually increase to close to RM5.0b (based on RM550psf ASP in the next 1-2 years as demand grows for its MSC status offices). The group will be launching up to RM500m p.a. projects based on 1.0m sf of GFA p.a. The recent launch of its service apartments, i-Residence (GDV: RM230m; ASP: RM500psf) saw a 65% take-up. Other FY12 launches include SOVO/SOHO products. There may also be potential en-bloc sales this year featuring an office block @ i-City with a 50% occupancy rate. i-Bhd is also in the process of finalising its alliance with Everbright International China (EIC) where the latter will serve as a turnkey contractor to 1) fund the construction cost, which will expedites iCity developments and 2) bring in investors/tenants from China. 

Zero gearing balance sheet. The company has maintained a net cash position for the last 5 years. i-Bhd enjoys the first right of refusal to acquire i-City land from its parent. Still, its land payments are extremely favourable as it is progressive i.e. project billings are used to match land payments. Although the land originates from its parent company, Sumurwang S/B and is considered a RPT, management assures that a decent development margin of 20% will be maintained. We do not foresee any gearing requirements unless it is building offices, which will be sold on a BTS basis. 

Growing recurring revenue will be handy for downturns. i-Bhd intends to keep 20% of i-City components (e.g. mall, data centre) for recurring income. The leisure segment (e.g. theme parks, SnoWalk, etc), has been  doing very well and sees rich EBIT margins of 42%. Management expects FY12E leisure revenue to increase by >100% to RM30m. Going forward, we expect its recurring income segments, including leisure, ICT services and property investment, to make-up 45%-29% of FY12-13E EBIT. 

We estimate FY12-13E net profit at RM11.4m'RM24.3m, which will yield >100% YoY growth each, based on targeted FY12-13E property sales of RM225mRM270m. Our FY12E sales target is conservative as i-Bhd has already secured c.RM150m sales from i-Residences. Note that all residential/SOHO/SOVO contents will be sold on a STB basis. No en bloc sales or commencement of BTS offices are imputed in our estimates. The major earnings driver is the leisure segment, where we expect FY12-13E leisure revenue to grow 40%-30% YoY based on capex plans.