IOI Properties Group Berhad Maintain NEUTRAL

Driven by property development division Unchanged Target Price (TP): RM2.34

INVESTMENT HIGHLIGHTS

• 6MFY17 earnings came in within expectations

• Driven by property development division

• New sales of RM1.5b in 6MFY17

• Maintain Neutral with unchanged TP of RM2.34

6MFY17 earnings came in within expectations. IOI Properties Group Berhad (IOIPG) 6MFY17 core net income of RM452.8m was within expectations, at 54% and 57% of our and consensus full year estimates. As expected, no dividend was declared for the quarter.

Driven by property development division. Core net income for 2QFY17 grew 50%qoq to RM271.6m, mainly due to higher margin and higher sales achieved in property development division. That brought 6MFY17 core net income to RM452.8m (+7%yoy). The higher earnings on yearly basis was mainly driven by property development division and property investment division. Operating profit of property development division increased by 24%yoy, buoyed by higher contribution from its Singapore and local projects namely IOI Resort City, 16 Sierra and Bandar Puteri in Bangi. Similarly, operating profit of property investment division climbed 28%yoy, underpinned by higher rental income from IOI City Mall. Meanwhile, 2QFY17 unbilled sales stood at RM1.62b (a marginal increase from 1QFY17’s RM1.59b). This provides less than one year earnings visibility to property development division.

New sales of RM1.5b in 6MFY17. IOIPG registered new property sales of RM795m in 2QFY17 (1QFY17 new sales: RM730m). 53% of the new sales were contributed by local projects, 40% from Singapore project while the remaining 7% from project in China. That brought total new sales to RM1.53b in 6MFY17 which is within our and management new sales target of RM2.3b for FY17. We maintain our sales target as we believe that property sales of IOIPG in FY17 will continue to be driven by its local projects and Singapore project.

Maintain Neutral with unchanged TP of RM2.34. We maintain our earnings forecast for FY17/18. We also maintain our TP of RM2.34, based on 40% discount to fully-diluted RNAV. While sales outlook for IOIPG is stable, net gearing of IOIPG is expected to climb above 0.5x post Singapore land tender and rights issue. Hence, we maintain our Neutral recommendation on IOIPG.

Source: MIDF Research - 22 Feb 2017