Review

• Ibraco reported 1Q24 net profit of RM5.3mn, which accounted for 11% of our full-year forecasts. However, we consider the results within expectations, anticipating that 2H24 should yield more significant earnings contribution from its on-going property and construction projects, as they progress to more advanced stages.

• YoY. 1Q24 net profit fell 49% to RM5.3mn, primarily due to lower revenue from the property development division, increased administrative and sales & marketing expenses, and higher tax expenses.

• QoQ. 1Q24 profit declined 11%, primarily attributed to lower recognition of work done, affected by the rainy and festive seasons.

Impact

• No change to FY24-26 earnings forecasts.

Outlook

• Despite a 54% YoY and 32% QoQ decrease in 1Q new property sales to RM37.0mn, Ibraco remains optimistic about achieving its FY24 sales target of RM400mn. The group plans to roll out properties worth RM1.6bn in GDV this year. Notably, Residensi NewUrban (GDV: RM529mn), an affordable service apartment in Petaling Jaya launched in March 2024, is expected to contribute positively due to its strategic location and surrounding conveniences.

• Despite holding a sizable construction orderbook, we understand that Ibraco's management remains proactive in seeking additional building and infrastructure projects from both the public and private sectors. Current tender book stands at RM500mn.

• The group’s future earnings are expected to be anchored by unbilled sales of RM209mn and outstanding construction orderbook of RM1.1bn.

Valuation

• We arrive at a new SOP-derived TP of RM1.33/share (previously RM1.18/share). This incorporates an increased P/E multiple of 10x (previously 9x) for the property development and management divisions to reflect the upbeat property sector sentiment. For the construction division, we raise the P/E multiple to 14x (previously 12x), considering the group’s potential to benefit from the infrastructure boom in Sarawak. Meanwhile, the quarry & others segments and quarry segments are valued at 10x CY25 earnings (unchanged).

• We remain positive on Ibraco's strong position in Sarawak, which has led to robust property sales and the securing of construction projects with above-average profit margins. Maintain Buy.

Source: TA Research - 27 May 2024