• Maintain BUY, with new TP of MYR2.75 from MYR2.50, 21% upside and c.2% FY24F (Jun) yield. 2QFY24 results missed expectations, largely due to weaker property sales from China. Despite the weaker earnings, the potential REIT listing of some of IOI Properties’ property assets are expected to drive investor interest in the stock. Our higher TP reflects the new GDV of Marina View as the project will be rolled out as a branded residential project at a later date.

• 2QFY24 results. Sequential revenue for property development declined due to lower property sales from Malaysia and China. The property investment division saw better growth YoY and QoQ, mainly due to the seasonal spike during the year-end festive season, while IOI City Mall Phase 2 achieved 94% occupancy. Revenue for the leisure & hospitality segment was slightly lower YoY, as Palm Garden Hotel and Putrajaya Marriott Hotel were undergoing some refurbishment works. Note, EBIT and PBT in 1HFY23 were affected by MYR193m reversal of inventories written down, MYR470m revaluation gain and MYR35m impairment loss on property. Unsold completed inventories stayed relatively unchanged at MYR2.24bn compared with MYR2.25bn in 1QFY24 (after excluding the reclassification impact). Net gearing increased to 0.73x vs 0.70x in 1QFY24.

• Decent property sales in 1QFY24. Property sales achieved MYR583m vs MYR587m in 1QFY24. Total sales of MYR1.17bn for 1HFY24 included land sales from Johor (MYR211m) and Melaka (MYR154m). Including the land disposal, local projects contributed 95% of the total, while the balance is from projects in China. Local sales were mainly driven by projects in the Johor region (MYR543.2m). YTD-1HFY24, IOIPG has rolled out MYR1.9bn worth of projects, with an average take-up rate of only 38%. In the pipeline, COVO Residences in 16 Sierra (GDV: MYR313m) and 2Rio Residence in Bandar Puteri Puchong (GDV: MYR366m) will be launched in 2HFY24. The company’s MYR2bn sales target is unchanged, backed by bookings worth MYR385m.

• Marina View is now delayed further. Management now plans to roll out the Marina View project in Singapore as a branded residence with a much higher ASP of around SGD5k psf. Given the change in plans, the project will only be launched at a later date. As for the IOI Central Boulevard office, its committed occupancy has inched up closer to 50% now.

• Forecasts. We cut our FY24F-26F earnings by 8-15%, and expect land sales to boost earnings and margin in 2HFY24F. Unbilled sales rose to MYR722m from MYR509m as at 1QFY24.

• Higher TP. Our TP is based on an unchanged 50% discount to RNAV, and includes a 2% discount given our ESG score of 2.9 for the company.

Source: RHB Research - 29 Feb 2024