1H17 CNP of RM463m came above expectations on higher than expected billings. Sales of RM1.53b also positively surprised. No dividends as expected. Raise FY17-18E CNP by 6% each on increased sales of 18%- 13% to RM2.61b each. Worth a rebound play as its Fwd. PER of 13.7x is at trough valuations with decent yields of 3.7% for a big-cap. Upgrade to OUTPERFORM with higher ex-rights TP of RM2.23 (cum: RM2.44).

1H17 CNP of RM463m was above expectations, making up 58% of street?s and 62% of our, FY17E estimates. This was largely due to higher-than-expected billings. 1H17 sales of RM1.53b (+44% YoY) exceeded expectations too, at 70% and 67% of our RM2.2b target and the company?s target of RM2.3b, respectively. This was driven by strong Singapore and Malaysia sales. No dividends, as expected.

Riding on higher billings. YoY, 1H17 CNP rose by 10% largely due to a surge in property billings (+46%) particularly from the Trilinq Singapore project which has achieved c.80% take-up rate and is near completion while its billings from Malaysia (Connezion, Bandar Warisan Putri, Bandar Putri Bangi) are also in full swing. Property investment EBIT did well (+28%) from IOI City Mall improved performance. Effective tax rate was reduced to 28.8% from 33.1% due to more billings from Singapore and less from China. QoQ, 2Q16 CNP rose by 44% on similar reasons and one- off gains seen in its other operating income.

Outlook. The group will be completing its 1-for-4 rights issuance of up to RM1.52b soon (entitlement: 2/3/17). It was recently reported by The Starbiz that IOIPG targets RM2-2.5b of launches in 2017 with emphasis on affordable housing (Bandar Puteri Bangi, Bandar Warisan Puteri), its stronghold in Bandar Puteri Puchong (Le Pavilion), 16 Sierra, IOI City (Connezion) and Singapore (The Trilinq) while TheEdge had earlier reported it was targeting sales of RM2.3b. Nonetheless, we are raising FY17-18E CNPs by 6% each on increased sales assumptions by 18%-13% to RM2.61b (18%-0% YoY growth) (refer overleaf).

Upgrade to OUTPERFORM (from MP) with higher ex-rights TP of RM2.23 (from RM2.10) based on a narrower discount of 58% at historical mean levels (previously at 60%) on its FD RNAV of RM5.31. We had highlighted that IOIPG had generated low ROEs of c.4% since IPO with repeated cash-calls for acquisitions, which may take time to bear fruit. However, rebound plays at these levels are worthwhile considering with FY17-18E PERs of 13.7-13.6x being at its trough while its ability to surprise in both earnings and sales comes as a refreshing surprise which is a tough feat under the current environment. We also believe yield of 3.7% is decent for a big-cap developer. However, our RNAV discounts are pegged only at mean levels which we are comfortable after taking into account all the above factors.

Risks include: (i) weaker/stronger-than-expected property sales, (ii) margin issues, (iii) changes in real estate policies, (iv) changes in lending environments, (v) more cash-calls.

Source: Kenanga Research - 22 Feb 2017