IOI Properties’ 4QFY14 results came in within expectations. An 8 sen maiden dividend was declared. New sales totalled MYR1.97bn in FY14,largely contributed by projects in Malaysia and China. We expect the launch of Bandar Puteri @ Bangi to drive Klang Valley’s sales in FY15.The opening of IOI City Mall in Putrajaya at year-end could be the stock’s catalyst. We maintain our BUY rating and MYR3.38 FV. 

Within expectations. IOI Properties’ 4QFY14 earnings came in line withour expectations, but below market’s expectations. Revenue for the property development division was largely driven by projects in Malaysia, while headline net profit was lifted by a fair value gain on all investment properties amounting to MYR305.3m. An 8 sen final single-tier dividend was declared, representing 61% of core EPS. 

New sales of MYR1.97bn in FY14. New property sales amounted to MYR1.97bn, up from MYR1.5bn in 9MFY14. The full-year sales were mainly contributed by projects from Malaysia (65%), followed by China (34%) and Singapore (1%). We expect sales in the Klang Valley region to pick up going into FY15 as Bandar Puteri @ Bangi is now ready to be launched. Phase 1 will comprise 2-storey terraces and commercial shop lots worth a GDV of MYR600m. We understand that terrace homes and shop lots will be priced from MYR680,000 (22’ x 80’) and MYR1.35monwards. We expect the company to achieve MYR2bn sales in FY15. 

Forecasts cut.In view of the flattish sales growth, we expect minimal growth for the property development division in FY15-16F. Income from property investment, however, will likely grow stronger as IOI City Mall in Putrajaya will be opened towards the end of 2014, which should help to drive FY15 earnings. On a net basis, we lower our FY15 earningsforecast by 22%. Meanwhile, unbilled sales increased to MYR1.45bn, vs MYR1.2bn in the last quarter. 

Maintain BUY. We maintain our BUY rating and FV of MYR3.38, based on an unchanged 30% discount to RNAV. While earnings growth is decent, the opening of IOI City Mall in Putrajaya in year end could be the catalyst for the stock as we believe the mall’s revaluation should be positive for the company’s RNAV.

Source: RHB