• Maintain BUY, with new TP of MYR1.18 from MYR1.38, 20% upside and c.2% FY23F (Jun) yield. 4QFY22 results missed expectations, again, due to a further write-down of MYR60.2m for the Xiang’an project in China. Full- year property sales hit MYR1.93bn, and management is likely to set its FY23 sales target at MYR2bn. Our lower TP reflects prevailing macroeconomic headwinds. IOI City Mall Phase 2 and Central Boulevard Towers in Singapore should drive earnings growth over the next two years, while leasing activities for both properties have been encouraging so far.

• 4QFY22 results. Revenue for all segments saw sequential growth except property development, as property sales in China slowed due to protracted lockdowns. Overall earnings were hit by another write-down of MYR60.2m for the Xiang’an project after MYR111m write-off in the previous quarter. The quarter also saw a MYR147.3m fair value gain on investment properties, largely arising from IOI City Mall Phase 1 as well as IOI Mall Puchong. Net gearing remained relatively unchanged at 0.71x. No dividend was declared during this quarter, but we understand that the amount of dividend may be decided during the next board meeting in September.

• Better property sales in 4QFY22. New property sales reached MYR616m compared to MYR417.9m in 3QFY22. Full-year sales achieved MYR1.93bn vs MYR2.3bn in FY21. The slower sales were very much due to the slowdown in China as well as the expiry of the Home Ownership Campaign in Dec 2021. In our view, macroeconomic headwinds which include rising inflationary pressure and weakening of the MYR will pose more challenges to local economic growth and the property market in the coming quarters. Therefore, we expect IOI Properties’ property sales to stay flat in FY23F.

• IOI City Mall Phase 2 to be opened soon. IOI City Mall Phase 2 (NLA 1m sqf) is slated for opening on 25 Aug. We understand that the committed tenancy has reached 75-80%, including four anchor tenants. The new phase is expected to lift revenue for the property investment division by about MYR50-60m pa. Meanwhile, IOI Central Boulevard Towers in Singapore is scheduled to be completed in 2HCY23, and recently, it was reported that Amazon.com has signed a lease for about 369,000 sqf at the building, which is about 30% of the total NLA. We remain optimistic on the leasing prospects given the strong demand from international technology companies in Singapore.

• Forecasts. We cut our FY23F-24F earnings by about 14-15% to reflect the macroeconomic challenges ahead. Unbilled sales rose to MYR605m vs MYR537m as at 3QFY22.

• Lower TP. Our TP is now based on a larger 70% discount to RNAV (from 65%), and includes a 6% discount given IOIPG’s ESG score of 2.70.

Source: RHB Research - 23 Aug 2022