Maintain NEUTRAL, with an unchanged MYR0.52 TP, based on 60% discount to RNAV and suggesting a total return of 10%. 1Q18 earnings were exceeded expectations due to a lower effective tax rate and adoption of MFRS15. We expect the property market to remain weak this year, as most developers will likely hold back their launches and buyers will delay their purchases, in view of policy uncertainties, post-election.

1Q18 earnings above expectations. IBHD’s 1Q18 net profit of MYR24.5m exceeded expectations. Revenue improved 46.9% YoY, from the impact of the adoption of Malaysian Financial Reporting Standards (MFRS)15 and further sales from existing projects and the advancement of the construction progress. Earnings improved 16.6% YoY from a lower effective tax rate, given the over provision of deferred tax in the prior year. DPS of MYR0.0213 was declared.

Better new sales number. During the quarter, IBHD achieved MYR79m new sales (vs MYR59m in 1Q17) from higher sales for its 8Kia Peng project. However, unbilled sales now stands at MYR272.8m, slightly lower than 4Q17’s MYR274m. Management expects unbilled sales to grow this year from 8Kia Peng’s new sales. With challenging property market conditions, management has lower 2018 sales target to MYR280-350m (from MYR330-MYR400m).

Hill 10 almost fully booked. Hill 10 Residence, IBHD’s only project launched last year, had a take-up rate of 90% (booking rate is at 95%). Despite the high prices, we believe the good take-up rate is attributed to the upcoming mall – Central Plaza @ i-City slated for completion in 4Q18. However, in view of policy uncertainties post-election, we expect pipeline launches eg Hill 11 residence (GDV of MYR278m), Hill 12 residence (GDV of MYR281m) and Smart Office (GDV of MYR230m) to potentially be delayed this year.

All eyes on 8Kia Peng. We believe IBHD’s performance in the near term will be heavily dependent on 8Kia Peng. The project, launched in early FY16, had the take-up rate improve slightly to 12% (booking rate achieved: 20%). Given the slow take-up, construction progress has followed suit, with only 30% completed (target completion: end-2019).

Raise earnings forecasts. We revise up our FY18F-20F earnings by 14%, 3%, and 2% respectively due to MFRS15 adoption and higher earnings from 8Kia Peng. FY19F-20F earnings could be flat from lower property sales this year, and flat unbilled sales.

Maintain NEUTRAL. We maintain our DDM-based MYR0.52 TP with an unchanged discount to RNAV of 60%. The property market outlook will likely remain challenging, in view of the policy uncertainties post-election and volatility in the equity market.

Source: RHB Securities Research - 31 May 2018