KEY INVESTMENT HIGHLIGHTS

• 1QFY25 earnings deemed within our expectation
• Earnings hit by interest expenses
• 1QFY25 new sales at RM332m
• Earnings forecast maintained
• Maintain NEUTRAL with an unchanged TP of RM2.04

1QFY25 earnings deemed within our expectation. IOI Properties Group (IOIPG) 1QFY25 core net income of RM74.7m is deemed within our expectation despite it made up 15% of our full year forecast as we expect stronger earnings from property investment division going forward following commencement of lease of Central Boulevard in Singapore.

Earnings hit by interest expenses. Sequentially, 1QFY25 core net income increased to RM74.7m (+216%qoq) as earnings in 4QFY24 were hit by higher depreciation and amortisation charges. On yearly basis, 1QFY25 core net income fell to RM74.7m (-57.3%yoy) despite higher topline (+6.1%yoy) as earnings were weighed by higher interest cost which surged to RM109m in 1QFY25 from RM356k in 1QFY24 as interest expense for Central Boulevard is not capitalised from FY25 onwards following completion of the building in July 2024. Overall, contribution from property development division was lower due to weaker contribution from local projects and projects in China. Nevertheless, the earnings decline was cushioned by better performance of property investment division which mainly buoyed by IOI City Mall.

1QFY25 new sales at RM332m. IOIPG recorded new property sales of RM332m in 1QFY25, lower than new sales of RM550m in 4QFY24. Local projects contributed to 97% to total new sales in 1QFY25, driven by projects in Klang Valley namely IOI Resort City and Bandar Puchong Jaya.

Looking ahead, new sales momentum will sustain by launch of projects in Malaysia including upcoming phase at IOI Industrial Park @ Banting as IOIPG is looking to expand its presence in industrial property development. Besides, new sales prospect beyond FY25 is expected to be better due to upcoming launch of Marina View Residences in Singapore. Meanwhile, unbilled sales were flattish at RM711m in 1QFY25.

Maintain NEUTRAL with an unchanged TP of RM2.04. We maintain our earnings forecast for FY25/26/27F. We also maintain our TP for IOI Properties at RM2.04 based on 60% discount to RNAV. Despite the improving sales outlook which will be driven by launch of Marina View Residences in Singapore, net gearing of IOIPG is expected to increase going forward from net gearing of 0.69x in 1QFY25 due to development cost for Marina View Residences. Hence, we maintain our NEUTRAL call on IOIPG.

Source: MIDF Research - 26 Nov 2024