INVESTMENT HIGHLIGHTS

• 9MFY17 earnings ahead of expectations

• Higher contribution from all division

• New sales of RM2.2b in 9MFY17

• Maintain Neutral with a revised TP of RM2.35

9MFY17 earnings ahead of expectations. IOI Properties Group Berhad (IOIPG) 9MFY17 core net income of RM717.1m was above expectations, meeting 86% and 84% of our and consensus full year estimates respectively. The positive deviation is due to the higher-thanexpected property sales achieved from Singapore project and betterthan-expected margin.

Higher contribution from all division. Core net income for 9MFY17 increased 34%yoy to RM717.1m, driven by higher earnings contribution from all division. Note that we have excluded one-off additional buyer stamp duty with interest of RM163.9m incurred for Trilinq project in Singapore in our core net income calculation. Operating profit of property division climbed 11%yoy, primarily due to higher sales take-up rate for Trilinq project in Singapore of >70%. Similarly, operating profit of property investment division improved by 22%yoy, underpinned by higher contribution from IOI City Mall and office segments. Meanwhile, 3QFY17 unbilled sales stood at RM1.49b (declined from 2QFY17’s RM1.62b), providing less than one year earnings visibility to property development division.

New sales of RM2.2b in 9MFY17. IOIPG achieved new property sales of RM662m in 3QFY17 (2QFY17 new sales: RM795m). 43% of the new sales were contributed by Singapore project, 41% contributed by local projects, while the remaining 16% contributed by project in China. That brought total new sales to RM2.2b in 9MFY17, ahead of our and management full year sales target of RM2.3b. As such, we are revising our full year sales target to RM2.6b.

Maintain Neutral with a revised TP of RM2.35. We revise upwards our earnings forecast for FY17/18 marginally by 2.1%/2.4% after assuming higher sales target. Our TP has been revised higher to RM2.35 from RM2.34, in line with higher sales expected from Singapore project. Our TP is based on 40% discount to fully-diluted RNAV. While we expect sales outlook for IOIPG to be stable, net gearing of IOIPG climbed to 0.64x in 3QFY17 post Singapore land tender. Hence, we maintain our Neutral call on IOIPG.

Source: MIDF Research - 24 May 2017