• Maintain NEUTRAL and MYR0.18 TP, with 8% expected total return, based on 80% discount to RNAV. The lack of new launches since FY18, coupled with the slow take-up progress of existing launches, have proven disadvantageous for I-BHD as earnings missed expectations this quarter. While we think that the Home Ownership Campaign (HOC) will not meaningfully benefit the company, we are somewhat hopeful that its valueunlocking prospects as an integrated township in the heart of Selangor may be realised in the future.
• Results missed. 1Q20 core profit of MYR1.1m (-69.7% QoQ, -83% YoY) missed expectations. Revenue fell 38.3% QoQ and 30.1% YoY on the back of a lack of new launches since FY18. New sales for the quarter stood at MYR7.7m (translated to 10 units sold), which is marginally higher than 4Q19’s MYR5.3m. On the other hand, unbilled sales as at the end of March came in slightly lower at MYR94.2m (compared to MYR97.2m in 4Q19). There was no dividend payment in the current quarter.
• Slow progress still apparent. As for 8 Kia Peng, the target for completion by the end of the year seems highly likely at this juncture, with construction progress standing at 90-95% (from 87% in 4Q19). However, the take-up rate remains stagnant at 26% for the umpteenth quarter, and we believe this to be a cause for concern, considering that 8 Kia Peng was launched in FY16. Unchanged since 2Q19, the take-up rate for Hill 10 Residence (launched in FY17) is still at 93%, and construction progress is at 65%. Although management is optimistic that the launch of Hill 11 (GDV: MYR278m) will take place within the year, we take on a more prudent view. The launch of Hill 12 Residence (GDV: MYR281m) would be dependent on the sales progress of Hill 11.

• Small beneficiary of HOC. The recently announced reintroduction of the HOC is expected to act as a rerating catalyst for the property sector, but we believe mostly large-cap developers with massive geographic presence and brand equity would benefit substantially. That said, I-BHD is likely to feel the impact of the measures in the future, albeit only marginally. Regardless, i-City is set to become Selangor’s Golden Triangle with the Central i-City shopping centre (total NLA: c.1m sqf, MYR8 psf) and corporate office tower (GDV: MYR230m, completed in Dec 2019) being the key pull factors.

• Cut earnings, maintain TP. We cut our FY20F-21F earnings by 12-14%, on the grounds of an unexciting property market outlook, particularly for the smallcap names which still await a pick-up in sales prospects. Our unchanged TP of MYR0.18 is based on an 80% discount to RNAV.

Source: RHB Securities Research - 15 Jun 2020