23 November 2016 1QFY17 Results Review IOI Properties Group Berhad Earnings on track Maintain NEUTRAL Unchanged Target Price (TP): RM2.34 INVESTMENT HIGHLIGHTS Earnings within expectations Growing earnings in 1QFY17 Maintain new sales target of RM2.3b for FY17 Maintain Neutral with unchanged TP of RM2.34 Earnings within expectations. IOI Properties Group Berhad (IOIPG) 1QFY17 core net income of RM181.2m was within expectations, at 22% and 23% of our and consensus full year estimates. Growing earnings in 1QFY17. Core net income for 1QFY17 grew by 57%yoy due to higher contribution from property development division and property investment division. Operating profit of property development division climbed 28%yoy due to higher progress billing of its on-going property projects in Malaysia, Singapore, and China. Similarly, operating profit of property investment division grew 43%yoy, mainly driven by higher revenue contribution from IOI City Mall on the back of higher occupancy rate (from 88% to 94%) and positive rental reversion. On sequential basis, core net income for 1QFY17 was lower by declining 35%qoq mainly due to lower earnings contribution from property development division. Note that earnings of property development division in the previous quarter were boosted by profit recognition from Palm City project in China. Meanwhile, unbilled sales stood at RM1.59b, providing less than one year earnings visibility to property development division. Maintain new sales target of RM2.3b for FY17. IOIPG recorded new property sales of RM730m in 1QFY17 (4QFY17 new sales: RM748m). 49% of the new sales were contributed from Singapore project, followed by local projects which contributed 31% while the remaining 20% contributed from project in China. New sales of RM730m in 1QFY17 is within our and management expectations, making up 32% of our and management new sales target of RM2.3b for FY17. We reiterate our view that property sales of IOIPG in FY17 should continue to be supported by its local projects in Klang Valley and oversea projects in China and Singapore. Maintain Neutral with unchanged TP of RM2.34. We maintain our earnings forecast for FY17/18. We also maintain our TP of RM2.34, based on 40% discount to fully-diluted RNAV. While we take comfort in the stable sales outlook for IOIPG in FY17 and steady recurring income from property investment, the expected high net gearing of >0.5x post Singapore land tender and rights issue from current net gearing of 0.23x is a drag to IOIPG. Hence, we are maintaining our Neutral stance on IOIPG. RETURN STATS Price (22 Nov 2016) Target Price Expected Share Price Return MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures RM2.39 RM2.34-2.1% Expected Dividend Yield 3.3% Expected Total Return 1.2% STOCK INFO KLCI 1,629.32 Bursa / Bloomberg Board / Sector Syariah Compliant 5249/IOIPG MK Main/Properties Yes Issued shares (mil) 4,411.22 Par Value (RM) 1.00 Market cap. (RM m) 10,540.26 Price over NA 0.65 52-wk price Range RM2.01-RM2.65 Beta (against KLCI) 0.94 3-mth Avg Daily Vol 3.07m 3-mth Avg Daily Value Major Shareholders RM7.65m Vertical Capacity Sdn Bhd 51.0% Summervest Sdn Bhd 8.48% EPF 5.04%
Investment Statistics FYE June (RM m) 2014A 2015A 2016A 2017E 2018E Revenue 1,454 1,906 3,025 3,123 3,148 EBIT 1,069 1,006 1,290 1,019 1,041 PBT 1,120 1,130 1,525 1,142 1,164 Net Income 890 891 1,080 839 856 Core Net Income 387 574 813 839 856 EPS (sen) 31.9 25.8 24.4 19.0 15.5 Core EPS (sen) 13.9 16.7 18.4 19.0 15.5 Net DPS (sen) 8.0 6.0 8.0 8.0 6.4 Net Div Yield 3.3% 2.5% 3.3% 3.3% 2.7% Core PER 17.3 14.4 13.0 12.6 15.5 NTA/share 4.0 3.9 3.6 3.7 3.4 P/NTA 0.6 0.6 0.7 0.6 0.7 Core ROE 3.5% 4.3% 5.1% 5.1% 5% Core ROA 2.6% 3.1% 3.6% 3.6% 4% Source: MIDF Research 1QFY17 Results Summary FYE June (RM m, unless otherwise stated) Quarterly Results Cumulative Comments 1QFY17 %YoY %QoQ FY17 %YoY Revenue 899.5 51% 1% 899.5 51% Core EBIT 261.9 24% -5% 261.9 24% Core PBT 281.0 35% -30% 281.0 35% Net Income 189.6 64% -51% 189.6 64% Core Net Income 181.2 57% -35% 181.2 57% EPS (sen) 4.3 40% -51% 4.3 40% Core EPS (sen) 4.1 34% -35% 4.1 34% Higher revenue due to increased contribution from its key business divisions namely property development, property investment, and leisure & hospitality divisions. Higher core net income driven by property development and property investment divisions. Net DPS (sen) 0.0 0% N/A 0.0 0% As expected, no dividend in 1Q. NTA/share (RM) 3.7-2% 2% 3.7-2% Net Gearing (x) 0.23 NA NA 0.23 NA Core EBIT Margin 29.1% NA NA 29.1% NA Core PBT Margin 31.2% NA NA 31.2% NA Gearing increased post land tender in Xia Men, China. 2
IOIPG RNAV Stake Est remaining GDV (RM m) WACC (%) Value (RM m) Klang Valley Projects 16 Sierra, South Puchong 100% 2745 11% 312 Bandar Puchong Jaya, Puchong 100% 750 11% 99 Bandar Puteri, Puchong 100% 2837 11% 338 IOI Resort City, Putrajaya 100% 19200 11% 1139 Bandar Puteri Bangi, Selangor 100% 3450 11% 411 Bandar Puteri Warisan, Sepang 100% 1083 11% 142 Johor Projects Bandar Putra Kulai, Johor 100% 1592 11% 151 Bandar Putra Segamat, Johor 100% 18 11% 3 Taman Lagenda Putra, Kulai, Johor 100% 27 11% 4 Taman Kempas Utama, Johor Bahru, Johor 100% 812 11% 102 The Platino, Johor Bahru, Johor 100% 100 11% 13 i-synergy, Senai, Kulai, Johor 100% 1720 11% 205 Other States Projects Desaria, Sungai Ara, Penang 100% 156 11% 21 Bandar IOI, Bahau, Negeri Sembilan 100% 806 11% 96 Singapore Projects South Beach, Beach Road, Singapore 50% 1667 11% 109 The Trilinq @ Jalan Lempeng, Singapore 88% 1250 11% 138 Cape Royale @ Sentosa Cove, Singapore 65% 4500 11% 270 Cityscape @ Farrer Park, Singapore 60% 1200 11% 73 Seascape @ Sentosa Cove 50% 825 11% 52 China Projects IOI Park Bay, Xiamen, PRC 100% 419 11% 55 IOI Palm City, Xiamen, PRC 100% 2170 11% 247 Unbilled sales 1500 186 Subtotal 4165 Remaining Landbank Net Surplus (RM m) Nusa Jaya 100% 0 Mukim of Pulai 100% 16 0 Segamat 100% 1254 0 Kulai Jaya 100% 467 0 Ayer Keroh 100% 1338 0 Bandar IOI, Bahau 100% 745 0 Investment Properties 100% 0 Total 4165 Shareholder Funds 17406.0 Total RNAV 21571 Enlarged share base 5534.8 Fully-diluted RNAV per share (RM) 3.90 Discount 40% Target Price (RM) 2.34 Source: MIDF Research 3
DAILY PRICE CHART Jessica Low Jze Tieng Jessica.low@midf.com.my 03-2173 8391 Source: Bloomberg 4
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Total return is expected to be <-15% over the next 12 months. Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 5