Review

• Ibraco’s 1Q17 net profit of RM3.3mn came in below expectations, accounting for only 9% of our full-year earnings forecast. The variance was largely due to slower-than-expected progress billings.

• Ibraco posted net profit of RM3.3mn in 1Q17, a decline of 59% from RM8.1mn a year ago. The drop in earnings was largely due to slow progress billing as its previous key contributing projects are nearing completion or have completed during the quarter under review.

• QoQ, the group’s 1Q17 net profit grew 2.1% despite a 28.5% drop in revenue. This was largely due to higher corporate social responsibility expenses and provision for staff bonus incurred in the immediate preceding quarter.

Impact

• Our FY17-19 earnings are revised lower by 7-33% to reflect the timing of revenue recognition of its high-rise projects. Our FY17/18/19 new property sales are largely unchanged at RM356mn/RM440mn/RM550mn respectively.

Outlook

• We estimate that the group recorded new sales of RM120mn in 1Q17. This came in within our FY17 sales assumptions of RM356mn. Continew, which is situated strategically along Jalan Tun Razak and Jalan Yew, was the key contributor to 1Q17 sales. We understand that a total of 247 units of serviced apartments are sold-to-date, representing 48% take up rate since its official launch in Feb-17.

• The group’s unbilled sales as at Mar-17 is estimated at RM303mn, which provides the group with about 2 years’ earnings visibility (1.9x FY16 property revenue).

• Looking forward, we expect new sales to be driven by Ibraco’s next major integrated development “Northbank” in Kuching, which entails a business park as well as guarded residential and commercial buildings. Targeted for launch in 3Q17, the maiden phase is expected to have an estimated GDV of RM220mn.

Valuation

• Underpinned by the change in earnings, we revise our target price to RM0.92/share from RM1.00/share previously, based on unchanged 9x CY18 EPS. With a total return of 10.7% we maintain our Hold recommendation on Ibraco.

Source: TA Research - 29 May 2017