1QFY20 revenue declined 38.9% yoy but PBT 24.7% higher

OIB’s group revenue declined 38.9% yoy in 1QFY20 as property development revenue dropped by almost the same percentage points. However, group PBT increased by 24.7% yoy as the availability of amortization of grant income for some higher margin contribution projects helped to reduce costs of sales. Contributions from general construction and oil palm cultivation are still not significant. As before, no interim dividend has been declared.

Qoq, 1QFY20 revenue declined by a sharper 53.4% but PBT still higher

Qoq, 1QFY20 revenue declined by a sharper 53.4% due to timing differences in the recognition of sales following efforts to clear inventory and launch projects. PBT however increased 4.1% mainly due to the higher margin contribution projects.

FY08/20 performance expected to come within expectations

1QFY20 core net profit of RM11.1m amount to 29.8% of our previous FY06/20 forecast of RM37.3m or 24.9% of our forecast of RM44.5m for the 14-month financial year ending 31 August 2020 after the change in financial year end. While 1QFY08/20 PBT was boosted by contributions from higher margin projects, we expect property sales to pick up in the coming 11 months.

HOC focus has boosted take up rates, new projects launched

Capitalising on the Home Ownership Campaign (HOC), take up rates for the Taman Belia Antarabangsa project in Ayer Keroh, Melaka and Taman Delima project in Kulim, Kedah reached 100%. OIB is also delivering vacant possession for three projects, namely Seroja Hills apartments, Taman Seri Bestari double storey homes and double storey homes under the PPAM Taman Sinar Intan 3 project. Three new projects (2 of which are under the Myhome Scheme) with a total GDV of RM165m has also been launched. Unbilled property sales as at end-Sept 2019 is RM105.6m.

Land banks amount to 1,998 acres

Following the acquisition of 104 acres of freehold land in Kuala Langat from Sime Darby Plantation Berhad for RM40.1m, OIB’s land banks, including land banks under and owners and developer agreements, amounted to 1,998 acres. The group is still on the look-out for more land acquisitions or asset-light joint venture opportunities.

Maintain TP of RM2.70 and BUY rating

Pegging an unchanged target PE of 10.8x on the unchanged CY20F EPS of 25.0 sen, the target price for OIB is maintain at RM2.70, still below the stock’s NAV of RM2.90. At current price, OIB is still rated as a BUY for its attractive valuation, good management and reasonable dividend yield.

Source: Mercury Research - 21 Nov 2019