PETALING JAYA:IOI Properties Group Bhd (IOIPG ), which saw its fourth quarter net profit (4Q22) rise by 147%, is expected to maintain its positive earnings outlook for the current year, thanks to its investment portfolio expansion and the turnaround of its leisure and hospitality segments.
Although there could be challenges ahead for the group, analysts remain upbeat about its earnings outlook in the near term.
Kenanga Research, which is maintaining its “outperform” call on the stock, said IOIPG’s expanding investment property portfolio could eventually be monetised via a real estate investment trust and its vast landbank acquired at a low cost that translates to above-average margins in the industry.
The research house said the group’s financial year 2022 (FY22) sales of RM1.93bil, comprising RM1.49bil in Malaysia and RM440mil in China, met its RM1.9bil target, but fell short of IOIPG’s internal target of RM2.1bil.
As at the end of June 2022, its unbilled sales stood at RM630mil.
“Moving forward, we expect two new investment properties to provide earnings growth for the group in the next two years.
“These key properties are IOI City Mall Phase 2 (commencing operations on Aug 25) and Central Boulevard Singapore (commencing operations in the second half of 2023).
Meanwhile, the depleting gross development value in China (about RM2bil outstanding) will be cushioned by the Marina View mixed development in Singapore under planning,” it noted.
Kenanga Research said it is raising its FY23 earnings forecast by 5% after imputing stronger joint venture contributions from Singapore, adding that it expects a FY24 earnings forecast of RM753mil, backed by RM1.9bil sales.
MIDF Research, which is maintaining a “buy” stance on IOIPG with a target price of RM1.29, said it sees a better earnings outlook for the group, driven mainly by the investment properties division and the turnaround of the leisure and hospitality segments.
AmInvestment Bank Research, however, said it is concerned about the sales of IOIPG’s ongoing projects in China, given the 32% year-on-year (y-o-y) slump in China’s property sales for January to June 2022.
“In August 2022, the People’s Bank of China lowered the five-year loan prime rate (LPR) by 0.15% to 4.30%, and the one-year LPR to 3.65% from 3.7%, to boost the property market. Notably, the one-year LPR serves as the reference rate for the majority of new loans in China.
“Although the easing of monetary policy may provide near-term relief to homebuyers, we remain cautious on China’s property market, due to tight Covid-19 curbs and still fragile demand.
“We continue to like IOIPG for its regional property development with a strong track record and successful real estate projects in Malaysia, Singapore (Sentosa Cove) and China (Xiamen), and resilient earnings amid a prolonged property sector downturn underpinned by recurring sales from predominantly owner-occupier homebuyers in established and highly sought-after township projects, particularly Bandar Puteri Puchong and Bandar Puchong Jaya.”
The group’s 4Q22 net profit ended June 30 rose by 147% y-o-y to RM292.48mil, while revenue for the quarter rose 9% y-o-y to RM715.94mil, as it saw a strong recovery in the retail and hospitality segments in Malaysia since the full withdrawal of movement restrictions.
“We expect two new investment properties to provide earnings growth for the group in the next two years.”Kenanga Research