• Maintain BUY and MYR2.10 TP, 28% upside and c.4% FY24F (Jun) yield. Central Boulevard’s leasing commencement in 1QCY24 is expected to be a major earnings catalyst for IOI Properties’ FY24F-25F. To date, leasing prospects have been very encouraging as global firms expand their presence in this region post pandemic. In China, the recent stimulus measures to revive the housing market should alleviate investor concerns over its exposure in Xiamen. Moreover, the launch of Marina View in Singapore in Oct 2023 should help boost FY24F property sales.

• Strong leasing prospects for Central Boulevard. We recently hosted a virtual meeting with Justine Jiew, Head of Investor Relations of IOIPG. We remain confident that IOI Central Boulevard Towers in Singapore will be the earnings kicker for FY24F-25F. This Green Mark Platinum Grade A office space in Marina Bay has been receiving strong demand. According to media reports, about 40% of the 1.26m sqf of office NLA has been committed, with another 20% in advanced stages of negotiation. It was also mentioned that these tenants are the global renowned players in the technology and finance sectors, and the company has also observed significant interest from the asset management, fast-moving consumer goods, legal, and other sectors. The building is expected to receive its temporary occupation permit in 1QCY24, and we expect occupancy to reach >80% upon its commencement of operations. At a market rental rate of SGD13-15 psf, this should be more than sufficient to offset the interest expense for the underlying loan.

• China to spur housing market. China’s new stimulus measures to boost the country’s ailing property market is nonetheless good news for IOIPG, as some investors are concerned over the company’s exposure in Xiamen. Just last week, it was announced that the minimum downpayment for mortgages and mortgage interest rates for first-time homebuyers will be cut. According to news reports, Beijing, Shanghai, Guangzhou, Shenzhen and Wuhan are among the cities that will start the financing easing measures. As such, although IOIPG is not going to launch any new products in China this year, we expect the remaining completed unsold inventory (worth MYR1.17bn) to gradually wind down over the next two years.

• Launch of Marina View to boost FY24F property sales. Despite the recent tightening policies, Marina View in Singapore (GDV: MYR8.5bn) is on track to be launched in Oct 2023. While we think the initial take-up will be somewhat slow, the value should nevertheless be significant to lift FY24F-25F property sales, on top of the usual sales generated from its Malaysia projects.

• Valuation. Our TP is based on 55% discount to RNAV, and includes a 2% discount given our ESG score of 2.9 for the company.

Source: RHB Securities Research - 4 Sept 2023