IOI PROPERTIES GROUP BHD

By Hong Leong Investment Bank Buy (upgraded)

Target price: RM2:54

IOI Properties Group Bhd’s third quarter 2017 core profit, excluding fair value gains of RM7.4mil and the one-off additional buyer stamp duty charges (ABSD), surged by 149%, driven by growth across property development, property investment and leisure and hospitality divisions.

Higher revenue by 39% year-on-year (y-oy) was due to higher sales take-up rates in Singapore and Xiamen, coupled with steady increase in progress work from existing projects. Year-to-date surge in core profit by 72% was on the back of higher revenue by 40%, driven by growth across all segments, mainly derived from the contribution of Trilinq in Singapore, IOI Resort City and Warisan Puteri Sepang.

The ABSD with interest of RM164mil (additional 10% levy on the land cost of S$408mil plus 5% interest) is recognised on the Trilinq project due to the Singapore ruling that developer must complete and sell all the units within five years.

Hong Leong Investment Bank (HLIB) gathered that Temporary Occupation Permit (TOP) for Trilinq has been obtained in April and handover of units are being carried out currently.

The remaining unsold and yet to launch units can then being recognised in revenue subsequently upon sale. Unbilled sales stand at RM1.48bil as at Q3’FY17.

New property sales achieved was RM662mil (versus RM795mil in Q1’FY17), bringing yearto-date sales to RM2.2bil, on pace to exceed full year sales target of RM2.3bil.

HLIB upgraded IOI Properties to “buy” as it saw value emerging post the dilutive rights issue exercise in Q1’CY17.