INVESTMENT HIGHLIGHTS

• FY18 earnings within our expectation

• Ended FY18 on a weaker note

• FY18 new sales at RM1.88b

• Earnings forecast unchanged

• Maintain Neutral with an unchanged TP of RM1.69

FY18 earnings within our expectation. IOI Properties Group Berhad (IOIPG) FY18 core net income of RM673.5m came in within our expectation but slightly below consensus, making up 96% and 92% of our and consensus full year estimates respectively. Dividend of 5 sen per share was announced.

Ended FY18 on a weaker note. IOIPG registered core net income of RM190.1m (-42.1%yoy) in 4QFY18, bringing full year core net income to RM673.5m (-35.6%yoy) in FY18. The lower earnings in FY18 were mainly due to lower contribution from property development division which were partly cushioned by property investment division. The weaker performance of property development division was mainly owing to lower contribution from overseas projects in Singapore. Meanwhile, performance of property investment division improved due to higher occupancy and rental rates for the retail and office assets. Meanwhile, 4QFY18 unbilled sales declined to RM648m from RM990m in 3QFY18, providing less than one year of earnings visibility to property development division.

FY18 new sales at RM1.88b. IOIPG chalked up new sales of RM410m in 4QFY18, higher than new sales of RM340m in 3QFY18. That brought total new sales to RM1.88b in FY18, lower than new sales of RM2.85b in FY17. Moreover, 61% of the new sales in FY18 were contributed by local projects, 30% contributed by Singapore project while the remaining 9% contributed by project in China. Meanwhile, IOIPG plans to launch its projects in Xiamen, China by end of this year.

Maintain Neutral with an unchanged TP of RM1.69. We maintain our earnings forecast for FY19. We also introduce earnings forecast for FY20. We maintain our TP of RM1.69, based on 58% discount to RNAV. We maintain our Neutral call on IOIPG due to tepid earnings outlook for its property development division.

Source: MIDF Research - 28 Aug 2018