Maintain NEUTRAL, new TP of MYR0.47 from MYR0.53, 4% total return/FY19F yield. Prefer Mah Sing (MSGB MK, BUY, TP: 1.30). IBHD’s earnings missed our and Street estimates on normalisation of tax rates during the quarter. As the outlook for the property market is still uncertain, some pipeline launches may be held back. We also remain cautious on the group’s unbilled sales, which plunged 47% QoQ, as well as low sales figures recorded in the recent quarter.

9M18 earnings below expectations. IBHD’s 9M18 net profit of MYR52.8m came in below our and Street expectations due to the normalisation of tax rates during the quarter (adjustment for MFRS 134). Revenue improved 3.6% YoY, on higher recognition of sales from projects under construction, and the completion of the Plot 2 development – Liberty, Perisian and Hyde. Meanwhile, earnings improved 6.5% YoY, in line with revenue growth.

Slow sales. In 3Q, the group only booked c.MYR20m in new sales (vs MYR75.7m in 2Q17). New sales were mostly generated by the 8 Kia Peng project. The group recorded cumulative new sales of MYR166m YTD, lagging its full-year target of MYR280-350m. With the slow sales, unbilled sales dropped to MYR160.7m, implying a 47% QoQ decrease.

Pipeline launches may be held back. With the completion of Plot 2, we believe the group’s performance over the near term will be heavily dependent on its 8 Kia Peng and Hill 10 projects – the only remaining property development projects for the group. However, in view of the challenging property market conditions, some pipeline projects eg Hill 11 Residence (GDV of MYR278m) and Hill 12 Residence (GDV of MYR281m) may be held back.

Hill 10 almost fully booked. Hill 10 Residence, the only project launched last year, achieved an encouraging take-up rate of 94%. Despite its hefty prices, we believe the good take-up rate was mainly attributed to the upcoming mall – Central Plaza @ i-City that is slated for completion in 1Q19.

8 Kia Peng still slow. 8 Kia Peng was launched in early FY16, and the take-up rate remains slow, at 22% (vs 20% in the previous quarter). Given the slow take-up, construction progress has been slow, and the project is only 47% complete (targeted to be completed by end-2019).

Maintain NEUTRAL. We cut our FY18-20F earnings by 10-14% due to the delay of launches and increase in other expenses arising from higher commission fees. We also cut our TP to MYR0.47 from MYR0.53, reflecting a higher discount to RNAV of 65% from 60%, on uncertainty over its future launches. In addition, we do not think Budget 2019, eg peer-to-peer financing, will benefit the group much, as most of its properties priced below MYR500,000 have been sold.

Source: RHB Securities Research - 8 Nov 2018