INVESTMENT HIGHLIGHTS

• 1HFY19 earnings within expectations

• Higher earnings in 1HFY19

• 1HFY19 new sales at RM1.04b

• Earnings forecasts unchanged

• Maintain Neutral with an unchanged TP of RM1.65

1HFY19 earnings within expectations. IOI Properties Group Berhad’s (IOIPG) 1HFY19 core net income of RM358.4m came in within our and consensus expectations, making up 51% and 53% of full year estimates respectively.

Higher earnings in 1HFY19. IOIPG registered higher core net income of RM358.4m (+9.7%yoy) in 1HFY19. The higher earnings in 1HFY19 were mainly due to higher contribution from property development division. Operating profit of property development division climbed 3.3%yoy, underpinned by higher contribution from project in China and higher share of profit in Singapore JV. Similarly, property investment division recorded higher operating profit (+6%yoy) due to higher occupancy and rental rates for retail and office assets. On a separate note, 2QFY19 unbilled sales declined to RM564m from RM869m in 1QFY19, providing less than one year of earnings visibility to property development division.

1HFY19 new sales at RM1.04b. IOIPG recorded new property sales of RM462m in 2QFY19, lower than new sales of RM574m in 1QFY19. That brought total new sales to RM1.04b in 1HFY19 which is in line with management target to achieve new sales of between RM1.8b to RM2b. 56% of new sales were contributed by project in Malaysia, 41% contributed by project in China while the remaining 3% sales were from Singapore projects. New sales momentum is expected to be driven by project in China and Malaysia.

Maintain Neutral with an unchanged TP of RM1.65. We make no changes to our earnings forecasts for FY19/FY20. We maintain our TP of RM1.65, based on 59% discount to RNAV. We maintain our Neutral call on IOIPG due to neutral near-term earnings outlook for IOIPG.

Source: MIDF Research - 27 Feb 2019