INVESTMENT HIGHLIGHTS

• 9MFY19 earnings within expectations

• Earnings improved in 9MFY19

• 9MFY19 new sales at RM1.38b

• Earnings forecasts unchanged

• Upgrade to BUY with an unchanged TP of RM1.65

9MFY19 earnings within expectations. IOI Properties Group Berhad (IOIPG) 9MFY19 core net income of RM531.3m came in within our and consensus expectations, making up 76% of respective full year estimates.

Earnings improved in 9MFY19. IOIPG recorded higher core net income of RM531.3m (+21.7%yoy) in 9MFY19. The improved earnings in 9MFY19 were mainly underpinned by higher contribution from property development division and property investment division. Operating profit of property development division increased 14.3%yoy, driven by higher contribution from project in China. Similarly, operating profit of property investment division climbed 2.4%yoy due to higher occupancy and rental rates for retail and office assets. Meanwhile, 3QFY19 unbilled sales increased to RM637.9m from RM564m in 2QFY19, providing less than one year of earnings visibility to property development division.

9MFY19 new sales at RM1.38b. IOIPG recorded new property sales of RM341m in 3QFY19, lower than new sales of RM462m in 2QFY19. That brought total new sales to RM1.38b in 9MFY19 which is in line with management target to achieve new sales of between RM1.8b to RM2b. Of the total new sales, 58% were contributed by project in Malaysia, 40% contributed by project in China while the remaining 2% were from Singapore projects. Looking ahead, new sales in 4QFY19 were expected to be driven by projects in China and Malaysia.

Upgrade to BUY 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 upgrade IOIPG to BUY from Neutral as we see the recent weakness in share price presents opportunity to accumulate IOIPG. IOIPG share price declined -22%ytd and now trading at 65% discount to NTA. Fundamental of IOIPG is largely intact while sales outlook remains stable.

Source: MIDF Research - 28 May 2019