- GDV of I-Berhad revised up to c.RM9.5b, including new project. IBHD has revised upwards its i-City GDV to RM7.5b due to higher ASP of RM800psf from RM5.0b GDV (ASP of RM600psf) since our last report dated 27-Nov-12, excluding its latest flagship project namely The Jewel (GDV: RM2.0b) which is expected to sell at an ASP of RM1,480psf when it is launched in 2016. The inclusion of The Jewel would further push its GDV upwards by another 28% to RM9.5b. While the company aspires to sell its properties at an ASP of RM1,480psf, we opine that I-City will need to convincingly break the RM1,000psf barrier which could take longer time beyond 2016. Nonetheless, we are still positive given that any upward revision in ASP would translate to a better margin for IBHD.

- Earnings outlook, bright as Jewel. IBHD’s recent proposed corporate exercise (share split, rights issue, bonus issue, ICULS and RCULS) which will raise c.RM700m for the funding of its development projects and also acquisition of three plots of land namely Kia Peng land, Soho Land and Tower Land with a collective GDV of RM3.7b (refer overleaf for more details) out of its total RM9.5b GDV would enable IBHD to better plan and execute its development plans in i-City and KLCC, which could easily sustain the group for another 10-15 years. At the same time, its unbilled sales remain strong at RM400m with at least two years’ visibility. Assuming conservative sales of RM354m-RM560m for FY14-15E, we are projecting its property division’s topline to grow by 84.5%-78.7% YoY in FY14-15E to RM177.3m-RM316.8m, respectively. As for its leisure division, we are projecting at least 20% topline growth given that it would be one of the key tourist spots within Visit Malaysia Campaign that in turn translates into 24% of its FY14E earnings of RM60.9m. All-in, driven by the momentous growth from both of its property and leisure division as per above, IBHD’s earnings are set to grow by 70%-65% in FY14-15E, respectively.

- 1Q14 earnings up 24%, YoY. To recap, IBHD’s earnings improved by 24% from RM4.9m to RM6.1m underpinned by revenue growth of 67%. The major driver of its revenue growth comes from its property development division, which make up 73%. Property development revenue grew significantly by 131.5% as it is driven by higher percentage of recognition for both the project completion and sales for i-Residence, i-SOVO and i-SOHO projects.

- Trading Buy, FD EX-ALL TP at RM0.96 (cum-TP: RM4.13). We derive a higher FD ex-all TP of RM0.96 (cum-TP: RM4.13, previous cum-TP: RM1.97) as we factored the increased GDV from RM5.0b to RM9.5b while maintaining our property RNAV discount at 50% (refer overleaf for more details). Post corporate exercise, IBHD would see its market capitalisation increase by 51.4% to c.RM587m (approximately RM1.2b, post conversion of warrants, ICULS and RCULS) which implies it would be trading at FY14-15E core PER of 9.5x and 6.7x, respectively, and its shares liquidity would also subsequently improve. Our FD diluted ex-all TP of RM0.96 implies FY14-15E core PER of 11x and 7.8x. Its valuation are still compelling given that its GDV/Market Capitalisation of 16.2x is above mid-cap peer average of 6.0x, However, we note that there would be a huge dilution in its earnings should all of its ICULS and RCULS are fully converted concurrently, but we would expect the dilution impact within the first two years to be minimal as its RCULS can only be converted on the 2nd year of its issuance.

Source: Kenanga