KEY INVESTMENT HIGHLIGHTS

• 1QFY20 earnings within expectations

• Earnings driven by oversea contribution

• 1QFY20 new property sales at RM389.5m

• Earnings estimates maintained

• Maintain BUY with an unchanged TP of RM1.53

1QFY20 earnings within expectations. IOI Properties Group (IOIPG) 1QFY20 core net income of RM190.6m came in within expectations, making up 27% of our and consensus full year estimates. Note that we have excluded forex loss of RM54m in our core net income calculations.

Earnings driven by oversea contribution. IOIPG registered higher core net income of RM190.6m (+22.4%yoy) in 1QFY20. The higher earnings in 1QFY20 were mainly underpinned by improved contribution from property development division and property investment division. Operating profit of property development division climbed 11.5%yoy mainly due to contribution from overseas project in China and projects in Klang Valley. Besides, higher share of profit in joint venture from the sale of South Beach Residences in Singapore also helped in earnings growth. Similarly, operating profit of property investment division is higher by 9.8%yoy due to better rental income. Meanwhile, unbilled sales increased to RM750m in 1QFY20 from RM610m in 4QFY19.

1QFY20 new property sales at RM389.5m. IOIPG recorded new property sales of RM389.5m in 1QFY20, lower than new sales of RM550m in 4QFY19. Malaysia makes up 56% of new sales followed by China at 44%. New sales in 1QFY20 is deemed in line with management target to maintain flattish new sales in FY20 against new sales of RM1.9b in FY19. Going forward, new sales prospect is expected to support by launches in China and local projects.

Maintain BUY with an unchanged TP of RM1.53. We make no changes to our earnings forecast for FY20F. We also introduce earnings forecast for FY21F. We maintain our TP for IOIPG at RM1.53, based on 62% discount to RNAV. We maintain our BUY recommendation as earnings prospect remains stable, underpinning by its geographically diversified projects exposure. Valuation is also attractive as it is currently trading at 66% discount to NTA of RM3.4 per share.

Source: MIDF Research - 26 Nov 2019