PETALING JAYA: IOI Properties Group Bhd’s (IOIProp) earnings growth is expected to be lifted by year-end festivities, improving tourist arrivals and sales from upcoming launches in the near term.
RHB Research said IOIProp’s results for the first quarter of financial year 2024 (1Q24) were below expectations.
Sequential revenue for its property development business declined due to lower property sales from Malaysia and China.
“The property investment division saw significant growth year-on-year (y-o-y) and quarter-on-quarter (q-o-q), mainly driven by the high occupancy of IOI City Mall Phase 1 & 2, as well as other retail assets,” the research house wrote in a report yesterday.
On the other hand, the research house noted headline net profit in 4Q23 was skewed by a few one-off items like RM246.4mil fair value gain, RM93.4mil impairment loss on investment property, and RM18.5mil inventories written down.
IOIProp’s net gearing remained steady at 0.70 times versus 0.68 times in the last quarter.
In 1Q24, the group rolled out RM1.13bil worth of properties, of which RM676mil is from the Conezion commercial project in IOI Resort City.
“The overall take-up rate remains low at 36%, given the timing of launch (mainly in September).
“In the pipeline, the Marina View project will be launched in 3Q24, delayed from October 2023,” RHB Research said.
With regards to unsold inventory, IOIProp’s unsold completed inventory rose to RM2.72bil in 1Q24 from RM2.41bil in 4Q23.
“Although the bulk is due to the unsold units in Xiamen, the increase was attributed to the reclassification of the commercial units in Conezion, which was previously grouped under investment property, but now under inventories, as well as the agriculture land in Kulai sold to Eco World that was under land held for development, now also under inventories,” RHB Research said.
As such, the group’s unsold completed inventories should be at RM2.25bil, excluding the reclassified items, as RM159mil worth of inventories were sold during the quarter.
RHB Research maintained a “buy” call on IOIProp with a target price (TP) of RM2.10 a share.
Meanwhile, Hong Leong Investment Bank (HLIB) Research expects further improvement to come from IOIProp’s hospitality segment going forward as its hotel assets namely Palm Garden, A Tribute Portfolio and Putrajaya Marriott reopen post-refurbishment.
“The improving tourist arrivals should benefit the group’s IOI City Mall and its hotels.
“IOI Central Boulevard is on track to commence operations in 3Q24 and should see maiden contribution in the second half of financial year 2024 (FY24) with more meaningful contribution coming in FY25.
For its upcoming Marina View Residences launch, the group anticipates demand to be supported by local Singapore buyers with strong spending power,” the research house stated.
HLIB Research maintained a “buy” call on IOIProp with a TP of RM2.50 a share. It continues to view the group’s prospects positively, especially for the Singapore real estate market with its upcoming new office building IOI Central Boulevard and the launch of Marina View Residences.
These two developments are expected to drive IOIProp’s earnings from FY25 onwards.
On the other hand, TA Research noted the management sees an advantage in building confidence among buyers looking for properties for immediate use, with most of the group’s residential units already completed.
IOIProp will focus on improving sales of completed inventories in China.
“FY24 sales could see additional growth from the anticipated launch of Marina View in Singapore, with a potential gross development value of S$2.58bil (683 units of luxurious condominiums),” the research house said.
TA Research maintained a “buy” call on IOIProp with a TP of RM2.09 a share.