INVESTMENT HIGHLIGHTS

• 1QFY19 earnings within expectations

• Dragged by property development division

• 1QFY19 new sales at RM574m

• Earnings forecast unchanged

• Maintain Neutral with an unchanged TP of RM1.69

1QFY19 earnings within expectations. IOI Properties Group Berhad (IOIPG) 1QFY19 core net income of RM155.7m came in within our and consensus’ expectations, making up 22% of respective full year estimates.

Dragged by property development division. IOIPG recorded core net income of RM155.7m in 1QFY19, declining by -21.3%yoy. The weaker income in 1QFY19 was mainly due to lower contribution from property development division. Operating profit of property development division shrank by -33%yoy, owing to lower property sales from Singapore and lower contribution from development projects in Malaysia. Nevertheless, earnings were partly cushioned by earnings contribution from China project. On the other hand, earnings from property investment division were marginally higher due to higher occupancy and rental rates for retail and office assets. Meanwhile, 1QFY19 unbilled sales climbed to RM869m from RM648m in 4QFY18, providing less than one year of earnings visibility to property development division.

1QFY19 new sales at RM574m. IOIPG registered new property sales of RM574m in 1QFY19, higher than new sales of RM410m in 4QFY18. 49% of new sales were contributed by project in China, 46% contributed by local projects while the remaining 5% sales were from Singapore projects. New sales momentum is expected to driven by project in China as IOIPG plans to launch projects in IOI Palm City, Xiamen with total GDV of RMB4 billion within two years.

Maintain Neutral with an unchanged TP of RM1.69. We make no changes to our earnings forecast for FY19/FY20. We maintain our TP of RM1.69, based on 58% discount to RNAV. We maintain our Neutral call on IOIPG as near-term earnings outlook remains subdued. Nevertheless, new sales momentum of IOIPG is expected to remain supported by project in China.

Source: MIDF Research - 26 Nov 2018