KEY INVESTMENT HIGHLIGHTS

• FY20 earnings above expectations

• Earnings helped by contribution from overseas project

• FY20 new property sales at RM1.84b

• Earnings estimates revised upwards

• Maintain BUY with a revised TP of RM1.33

FY20 earnings above expectations. IOI Properties Group (IOIPG) FY20 core net income of RM623m came in above expectations, making up 120% and 117% of our and consensus full year estimates respectively. The positive deviation could be attributed to the stronger than expected earnings contribution from project in China. Meanwhile, dividend of 1.5sen per share was announced.

Earnings helped by contribution from overseas project. IOIPG recorded higher core net income of RM177.6m (+62.7%yoy) as earnings were supported by contribution from project in China which cushioned the adverse impact from Movement Control Order (MCO) on its property project in Malaysia. Operating profit of property development division jumped by 193%yoy in 4QFY20 as IOI registered strong sale of its project in IOI Palm City, Xiamen due to pent up demand following China’s recovery from the Covid-19 pandemic. Meanwhile, operating profit of property investment division eased 66.6%yoy mainly due to lower rental income arising from rental assistance scheme during MCO. That led cumulative core net earnings to RM623.2m (-2.7%yoy).

FY20 new property sales at RM1.84b. IOIPG registered decent new property sales of RM700m in 4QFY20, higher than new property sales of RM267m recorded in 3QFY20 as new sales were supported by project launches in China. That brought total new sales to RM1.84b in FY20, slightly lower than new sales of RM1.93b in FY19. Malaysia makes up 61% of new sales followed by China and Singapore at 38% and 1% respectively. Meanwhile, unbilled sales increased to RM607m in 4QFY20 from RM517m in 3QFY20.

Maintain BUY with a revised TP of RM1.33. We revise our FY21F earnings forecast by +4.6% to take into account of strong contribution from China projects. We also introduce our earnings forecast for FY22F. Meanwhile, we revise our TP for IOIPG to RM1.33 from RM1.29 as we narrow our RNAV discount to 67% from 68%. We maintain our Buy call on IOIPG as its valuation remains is attractive, trading at steep discount of 74% to NTA of RM3.45 per share. Besides, earnings outlook is expected to be supported by project in China and gradual recovery in progress billing in Malaysia.

Source: MIDF Research - 1 Sept 2020