2QFY21 CNP of RM147.4m (-15% QoQ; -15% YoY) lifted 1HFY21 CNP to RM321.6m (-11% YoY) – in line with both our/consensus forecast at 47%/53%. 1HFY21 sales of RM0.916b is also in line with our RM1.9b target. No dividends as expected. On unchanged earnings, upgrade to MP with higher TP of RM1.32 (from UP; RM0.97) based on higher 0.38x PBV (from 0.28x) to capture the improving Covid-19 situation as vaccines gradually rolls out.

Within expectations. 2QFY21 CNP of RM147.4m lifted 1HFY21 CNP to RM321.6m – in line with both our/consensus forecast at 47%/53%. No dividends were declared as expected.

Sales also in line. 2QFY21 registered sales of RM0.443b (whereby breakdown between Malaysia, China and SG are at 57%, 40% and 3%, respectively) bringing 1HFY21 sales to RM0.916b, in line with our RM1.9b sales target at 48%. Note that IOIPG has launched a total of RM1.4b worth of properties YTD with RM0.96b in 1QFY21 and RM0.44b in 2QFY21.

Highlights. 2QFY21 CNP decreased 15% QoQ to RM147m owing to weaker contributions from all segments attributed to the reimplementation of the stricter CMCO (vs RMCO) on 14/10/20.

Despite being hit by the pandemic, 1HFY21 EBIT actually improved 3% YoY as property contribution from China was so strong that it overwhelmed the slump in the property investment and hospitality segments. That said, 1HFY21 CNP of RM321.6m was down 11% due to the higher effective tax rate of 40% (+2ppt).

Outlook. Property sales from its two townships in China (IOI Palm City and IOI Palm International Parkhouse which have remaining GDV of c.RM3b) will likely remain encouraging and underpin the group’s earnings in the subsequent quarters. While its Malaysian operation may not be as great, it will remain satisfactory. Unbilled sales stood at RM477m while unsold properties were at RM2.12b as of 2QFY21.

Footfalls at malls have been gradually recovering and expected to improve in the immediate future given the easing of lockdowns and deployment of the Covid-19 vaccines. In the upcoming two years, its property investment division would add on 3.4m sf (+58%) of NLA while its hospitality division would add on 865 hotel keys (+46%). These additions would be timely as we foresee market confidence recovering and growing in tandem with the vaccine roll outs.

Earnings. Maintain our FY21/22E earnings post results on unchanged FY21/22E sales assumption of RM1.9b each.

Upgrade to MP with higher TP of RM1.32 (from UP; TP: RM0.97) based on 0.38x Fwd. PBV pegged to -1.0SD below 5-year mean (from 0.28x PBV at -1.5SD). Our valuation upgrade is premised on the clearer visibility and improving outlook for its property investment division which was previously hampered by the Covid-19 crisis.

Source: Kenanga Research - 23 Feb 2021