PETALING JAYA: IOI Properties Group Bhd
’s (IOIPG) lofty valuations despite the stronger-than-expected earnings is tempering optimism over the company’s improving operational performance, with analysts pointing to concerns over elevated gearing.
Research houses generally agreed that IOIPG’s medium-term outlook remains supported by stronger recurring income from its Singapore assets, ongoing land monetisation exercises and the proposed Malaysian real estate investment trust (REIT) listing.
However, several analysts downgraded the stock after its strong share price rally this year.
TA Research said: “We remain positive on IOIPG’s medium-term fundamentals, but see a more balanced risk-reward, with elevated gearing the key concern.”
The research house downgraded the stock to a “hold” from “buy”, noting that “upside is now limited at 7.4% following recent share price strength”.
Similarly, CGS International (CGSI) Research said it was downgrading the stock to a “hold” because most catalysts have been priced in following the counter’s 59% year-to-date rally.
The more cautious stance came despite a strong set of financial results for the nine months ended March 2026 (9M26).
TA Research said IOIPG’s results for 9M26 beat expectations, adding that the outperformance was mainly driven by stronger-than-expected development margins following the Melaka land sale recognition.
CGSI Research said its 9M26 core net profit of RM624mil came in above expectations at 78% of previous forecasts for the financial year ending June 2026 (FY26) and 88% of Bloomberg consensus estimates.
“We believe the outperformance was driven by higher-than-expected profit margin from its Melaka land sale,” it said.
The Melaka land disposal emerged as a major contributor to earnings during the quarter, with CGSI Research noting that the sale – secured in FY24 – came with a RM130mil revenue and RM119mil earnings before interest and tax.
Analysts observed that IOIPG’s earnings mix has increasingly been shifting towards commercial and industrial developments, which typically carry stronger margins.
“We observed the group’s commercial and industrial product mix in 9M26 rising to approximately 62% – versus approximately 17% in the preceding year – which has turned us more positive on its medium term prospects, given the generally stronger margins from these product types,” Kenanga Research said.
The company’s Singapore investment assets also continued to strengthen recurring income visibility.
“The IOI Central Boulevard Towers’ (IOICBT) committed occupancy has reached 98%, although physical occupancy remains at 75% and is expected to rise to approximately 80% by the fourth quarter ending June 2026,” TA Research said.
Kenanga Research similarly noted that IOICBT continues to see improvements to its committed occupancy, which would translate to stronger rental income in the year ahead.
Meanwhile, analysts said land monetisation remains an important earnings catalyst for the company.
TA Research said IOIPG had guided for “operating margins of about 60%” for pending land disposals in Jalan Ampang, Senai and Banting.
On the other hand, analysts are still mindful of the company’s balance sheet, with TA Research cautioning that gearing remains the key concern, while Kenanga Research said the proposed REIT listing would help the company pare down its debt and net gearing of 0.86 times.
Despite the more cautious recommendations, analysts generally raised their target prices (TPs) after revising its earnings assumptions upward.
TA Research raised its TP for the stock to RM4.52, CGSI Research increased its TP to RM4.51, while Kenanga Research lifted its valuation of IOIPG to RM4.01.
