• Maintain NEUTRAL, TP dips to MYR0.40 from MYR0.41, 3% upside. IBHD’s earnings are below expectations and new sales continue to slow down on the lack of launches. Despite the disappointing earnings, we look forward to contributions from Central Plaza Mall, which commenced operations in March. From our site visit, we were quite impressed with the crowd of shoppers visiting there, even during working hours.

• 1Q19 net profit of MYR6.4m came in below our estimate due to lower than-expected contributions from the Hill 10 Residence and 8Kia Peng projects. 1Q19 revenue and net profit plunged 74% YoY from the lack of new projects, while key launches – Liberty, Parisien and Hyde – have been completed and handed over in 3Q18.

• Slow sales continue. During the quarter, the group only booked c.MYR13m in new sales (vs MYR 17m in 3Q17). New sales are mostly from 8Kia Peng and unsold units in its Plot 2 development. With sales being slow, unbilled sales depleted to MYR138m, dropping 7% QoQ.

• Pipeline launches in 2H19. With the completion of the Plot 2 development, we believe the group’s performance over the near term will be heavily dependent on 8Kia Peng and Hill 10 Residence. These are the only remaining property development projects left for the group. Management targets to launch Hill 11 residence (GDV: MYR278m) and Hill 12 residence (GDV: MYR281m) in 2H19 after the completion of Central Plaza Mall at i City.

• Hill 10 Residence and 8Kia Peng. Hill 10 Residence, its only project launched in the past two years, achieved an encouraging take-up rate of 94%. 8Kia Peng was launched in early FY16, and the take-up rate is still tepid, at 23%. Given the slow take-up rate, construction progress has also been sluggish, having only reached 57% completion (targeted to be completed by end-2019).

• Central Plaza Mall is a 40:60 joint development with Thai retail property developer, Central Pattana (CPN TB, BUY, TP: THB93). The 940,000 sqf NLA mall has been completed and commenced operations in March. From our short visit to the mall, we were quite impressed with its design and architecture, while shopper traffic was also encouraging.

• We trim FY19-20F earnings by 13-14% from the weaker-than-expected earnings from Hill 10 and 8Kia Peng. We also slightly pare down our TP to MYR0.40 from MYR0.41, due to house-keeping purposes – based on an unchanged discount to RNAV of 70%. Upside risks include higher-than expected earnings from Central Plaza Mall, while downside risks include further delays in new launches.

Source: RHB Securities Research - 31 May 2019