• Maintain NEUTRAL, with a new MYR0.23 TP from MYR0.35, 12% expected total yield, based on a higher 75% discount to RNAV. I-BHD’s earnings missed expectations as sluggish sales persisted for the quarter due to a lack of new launches to date. Meanwhile, the launches of Hill 11 Residence and Hill 12 Residence have been delayed to FY20, given the depressing condition of the property market currently, but we believe the potential of Central i-City Shopping Centre should provide some upside.

• Results came in below expectations. 9M19 net profit of MYR22.3m missed – making up 67% of our full-year estimates. Revenue fell 62% YoY due to the significantly lower contribution coming from the group’s property development segment for the quarter, premised on the lack of new project launches to date. The trend of slow sales persisted, as new sales of only MYR13m were registered for the quarter, up slightly from MYR12m in 2Q19. Unbilled sales reported for 3Q19 stood at MYR112.9m from MYR123.5m as at 2Q19. 9M19 net profit consequently fell 58% YoY.

• Property development still waiting for a pick up. Hill 10 Residence’s (launched FY17) take-up rate was 94% as at Sep 2019, unchanged from 2Q19, while the take-up rate for 8Kia Peng (launched FY16) currently stands at 26%, a marginal increase from the 25% registered in 2Q19. The completion of 8Kia Peng is slated for the end of the year, with construction progress reaching around 77% as at Sep 2019. Initially targeted to be launched in 4Q19, the launch of Hill 11 Residence (GDV: MYR278m) and Hill 12 Residence (GDV: MYR281m) have been delayed to 1H20 and 4Q20. Despite the delay, given the rising popularity of the newly-opened i-City mall, we believe these launches should be met with encouraging demand.

• Paying more attention to investment properties. Central i-City Shopping Centre (total NLA: c.1m sqf) – commanding average rental rate of MYR8 psf – began operations in March, currently houses anchor tenants such as Sogo, Village Grocer, and TGV Cinemas. The Corporate Office Tower (GDV: MYR230m), located in Plot 2, is targeted to be completed in December, but we believe that rental contributions for the tower will start trickling in from 2H20. Note that DoubleTree by Hilton is also scheduled to open its doors in FY21. I-BHD has been building its recurring income portfolio by also investing in parking spaces within i-City, which should be able to offer handsome returns in the long run, given that footfall to i-City mall is targeted to increase to 1m/month from 800,000/month currently.

• We slash our FY19F-20F earnings 14% and 8%, as we take into account the delay in the launches of Hill 11 Residence and Hill 12 Residence. As such, our TP is cut to MYR0.23, based on a higher discount to RNAV of 75%.

Source: RHB Securities Research - 29 Nov 2019