INVESTMENT HIGHLIGHTS

• FY19 earnings missed estimates

• Earnings for FY19 improved by 2.2%yoy to RM640.5m

• FY19 new sales at RM1.93b compared to RM1.88b in FY18

• Maintain BUY with an adjusted TP of RM1.53

FY19 earnings missed estimates. IOI Properties Group Berhad (IOIPG) FY19 core net income (CNI) of RM640.5m was a tad bit below ours and consensus’ expectation at 92% and 88% respectively. A full year dividend of 3.0 sen was announced. We have excluded impairment loss from a JV amounting to RM42.8m and fair value gain of RM93.4m from our CNI.

Earnings for FY19 improved by 2.2%yoy to RM640.5m. This is even though revenue slowing down by 17.7%yoy to RM2.2b, which came from lower contribution from Singapore after the completion of The Trilinq. Locally, lower projects completion led to lower revenue. The improvement in core PBT compared to the previous year can be attributed to the projects in China as well as higher share of profit in joint ventures mainly from the sale of South Beach Residences in Singapore.

4QFY19 CNI fell by 42.6% to RM109.2m in tandem with revenue that slipped by 17% to RM497.8m. CNI declined steeper than the fall in revenue partially because of the higher tax rate in China. Meanwhile, 4QFY19 unbilled sales stood at RM610.0m versus RM637.9m in 3QFY19.

FY19 new sales at RM1.93b compared to RM1.88b in FY18.

IOIPG recorded new property sales of about RM550m, which is higher than the RM341m registered in 3QFY19. This is mainly contributed by sale of projects in IOI Palm City, PRC. New sales achieved is in-line with management’s target of between RM1.8b to RM2b. Malaysia makes up 58% of new sales, out of which, 34% comes from the Klang Valley and 22% from Johor. This is followed by China at 39% and Singapore at 3%. Going forward, we expect new sizeable launches from China and Malaysia.

Maintain BUY with an adjusted TP of RM1.53 (previously RM1.65). We have revised our FY20F CNI by 6% to RM698m following the weaker than expected results. We have also adjusted our TP to RM1.53, based on 62% discount to RNAV from 59% previously. However, we maintain our BUY recommendation as we think new sales of RM1.93b is robust. Valuation is also attractive as it is currently trading at 71% discount to RNAV.

Source: MIDF Research - 30 Aug 2019