IOIPG’s  1QFY15  (Jun)  results  came  in  below  expectations.  Maintain BUY and MYR3.10 TP (26.5% upside). We expect 2H earnings to come in stronger  as  new  projects  are  progressively  rolled  out  in  the  coming months.  New  sales  in  1QFY15  reached  MYR370m,  of  which  85%  wascontributed by  projects in Malaysia. Meanwhile, we expect IOI City Mall, which had a soft launch last weekend, to boost FY16 earnings.

Below  expectations.  IOI Properties Group’s (IOIPG)  1QFY15  earnings came  in  below  our  and  market  expectations.  Sequential  turnover  fell 10%, mainly  on  the  decline  in  revenue  from the  property  development and leisure and hospitality divisions. Nevertheless, we do not think this is a major concern, as  1QFY14  was also the weakest quarter in FY14  in terms  of  topline .  Meanwhile,  EBIT  was  lower  YoY  as  higher  expenses were  incurred  as  bumi  units  in  some  projects  were  released.  Interest expense was also higher as more loans were drawn down.

MYR370m new sales in 1QFY15. IOIPG achieved MYR370m new sales in  1QFY15,  vs  MYR470m  in  4QFY14.  The  amount  was  mainly contributed  by  projects  from  Malaysia  (85%),  followed  by  China  (11%) and The Trilinq project in Singapore  (4%).  We expect new sales  to pick up in the upcoming quarters, especially from the  Klang Valley region  asBandar Puteri @ Bangi  is  slated for launch in  2QFY15. Phase 1, which comprises  terrace  homes  and  commercial  shops,  is  worth  a  GDV  of MYR600m. With this and other ongoing projects, we  believe  IOIPG  will be able to hit MYR2bn sales in FY15.

Forecasts.  Unbilled sales stayed resilient at MYR1.4bn, compared with MYR1.45bn  in  4QFY14.  We  make  no  changes  to  our  forecasts,  as earnings  in  2H  will  likely  pick  up  as  new  projects  are  progressively launched. IOI City Mall, which had a soft opening last weekend, will likely contribute  to  earnings  only  from   FY16  as  some  rebates/discounts  in rentals  and  a period for fit-out can be expected  in the first six months  of opening. The mall is already 90% leased. 

Maintain  BUY.  We  believe  IOIPG’s  share  price  has  corrected  to  an attractive  level  following  the  recent  announcement  of   its  rights  issue exercise.  Given  the  positive  earnings  outlook,  we  maintain  our  BUY rating and MYR3.10 TP.

Source: RHB