• Reiterate NEUTRAL and MYR0.18 TP, 14% expected total return, based on 80% discount to RNAV. Concerns surrounding a lack of launches since FY18, and the slow take-up progress of existing projects have led to I-BHD’s share price gradually falling by >50% since early FY19. However, we look on the investment arm of the group positively, seeing that the Central i-City shopping mall and corporate office tower are gaining considerable interest.

• Uncertain times for 8 Kia Peng. Launched in FY16, the project is slated for completion by the end of this year. With construction progress standing at 90- 95% (from 87% in 4Q19) and currently awaiting furnishing, we believe the target is highly achievable. The take-up rate has been the main cause of concern, remaining low at c.26% (from 22% as at end Dec 2018) due to the high price of its units, which ranges between MYR1.5m to MYR4m per unit. 80% of 8 Kia Peng buyers are international buyers, and we foresee local political uncertainties to continue to adversely impact near-term prospects. Nevertheless, management is in talks with an international hotel operator to allow for management services within the 8 Kia Peng premises – we view this positively.

• Development needs a boost. The take-up rate for Hill 10 Residence (launched in FY17) is still at 93%, and construction progress is at 65%. Although the Movement Control Order put a halt to construction progress, there has been a pick-up since the end of May. Management is optimistic that the launch of Hill 11 (GDV: MYR278m) will take place within the year, but we adopt a more prudent view and assume that the launch will take place in 1H21, at the earliest.

• Early stages of investment arm. Management is confident that the 10% discount brought about by the Home Ownership Campaign would stimulate demand for its projects. However, we believe large-cap developers with significant geographic presence and brand equity will benefit most from the campaign. Regardless, i-City is set to become Selangor’s Golden Triangle. While still at its early stages, the property investment arm of the group should also contribute to earnings in the medium term, as the Central i-City shopping centre (total NLA: c.1m sqf, MYR8.00psf) and corporate office tower (GDV: MYR230m, completed in Dec 2019) act as key drivers – with the latter receiving an encouraging number of enquiries of late.

• Maintain NEUTRAL. We leave our FY20F-22F earnings and TP of MYR0.18 unchanged. Our TP is based on an 80% discount to RNAV. Downside risks include a further delay in launches, while an upside risk is the higher-thanexpected earnings contribution from the investment properties.

Source: RHB Securities Research - 30 Jun 2020