KEY INVESTMENT HIGHLIGHTS

• 1QFY21 earnings within our expectation

• Higher earnings from property development division

• 1QFY21 new property sales at RM473m

• Earnings estimates maintained

• Maintain BUY with a unchanged TP of RM1.08

1QFY21 earnings within our expectation. IOI Properties Group (IOIPG) 1QFY21 core net income of RM175.8m was above consensus expectation but within our expectation, making up 27% of our full year forecast. As expected, no dividend was declared for 1QFY21.

Higher earnings from property development division. IOIPG recorded lower core net income of RM175.8m (-7.7%yoy), mainly due to weaker contribution from property investment and hospitality & leisure segments which offset the higher contribution from property development division. Property investment division registered lower operating profit of RM47.1m (-14.4%yoy) mainly due to rental assistance given to tenants. Meanwhile, hospitality & leisure division sunk into the red as the division was hit by Covid-19 pandemic. Nevertheless, operating profit of property development division climbed by 31%yoy due to higher contribution from projects in China and Malaysia.

1QFY21 new property sales at RM473m. IOIPG recorded new property sales of RM473m in 1QFY21, lower than new sales of RM700m in 4QFY20. Sales from projects in China contributed 51% of total new sales while the remaining 49% new sales were contributed by projects in Malaysia. Looking ahead, new property sales of IOIPG are expected to be supported by sales from China projects. Meanwhile, unbilled sales decreased to RM563m in 1QFY21 from RM607m in 4QFY20, providing one year earnings visibility to property development division.

Maintain BUY with an unchanged TP of RM1.08. We make no changes to our FY21/22F earnings forecasts. We also maintain our TP for IOIPG at RM1.08, based on 73% discount to RNAV. Valuation of IOIPG is attractive, trading at steep discount of 71% to its latest NTA of RM3.42 per share. Besides, new sales outlook is expected to be supported by project in China. Hence, we maintain our BUY call on IOIPG.

Source: MIDF Research - 26 Nov 2020