Investment Highlights

• 1QFY18 earnings within expectations

• Positive start to FY18

• 1QFY18 new sales at RM677m

• Maintain Buy with unchanged TP of RM2.41

1QFY18 earnings within expectations. IOI Properties Group Berhad (IOIPG) 1QFY18 core net income of RM195.6m came in within expectations, making up 22.3% and 21.6% of our and consensus full year estimates. As expected, no dividend was announced for the quarter.

Positive start to FY18. Core net income for 1QFY18 climbed 8%yoy to RM195.6m, underpinned by higher contribution from all business divisions. Operating profit of property division grew 21%yoy, mainly driven by contribution from local projects. Similarly, operating profit of property investment division climbed 16%yoy, buoyed by higher occupancy rates and higher rental. Likewise, operating profit of leisure and hospitality division surged 161%yoy due to contribution from Le Meridian by Starwood in Putrajaya which commenced business operations in August 2016. On the other hand, 1QFY18 unbilled sales stood at RM930m (declined from 4QFY17's RM1.02b), providing less than one year earnings visibility to property development division.

1QFY18 new sales at RM677m. IOIPG recorded new property sales of RM677m in 1QFY18 (1QFY17 new sales: RM730m), higher than new sales of RM659m in 4QFY17. Local projects contributed 54% to the new sales, Singapore project contributed 34% while the remaining 12% contributed by project in China. Meanwhile, planned launches for FY18 include local projects and oversea projects in China and Singapore.

Maintain Buy with unchanged TP of RM2.41. We maintain our earnings forecasts for FY18/19. Our TP is unchanged at RM2.41, based on 40% discount to fully-diluted RNAV. Prospect for its property development in Singapore is improving as Singapore’s private home prices increased in 3Q2017. Besides, we also expect establishment of JV with Hongkong Land for the development of Central Boulevard site to improve balance sheet of IOIPG.

Source: MIDF Research - 21 Nov 2017