IOI Properties’ quarter three financial year 2023 results are within RHB Research (RHB)’s expectations, but beat the Street estimate. Year-to-date property sales and revenue for the quarter were affected by the slow recovery in its China business post re-opening, said RHB in the recent Malaysia Results Review Report.
Nonetheless, it remains committed to hitting its RM1.8-1.9 billion sales target for financial year 2023, as the nine months financial year 2023 sales and bookings amounted to RM1.37 billion and RM619 million. Its property investment unit should be the key earnings driver over the medium term.
Revenue for the property development segment was affected by the weaker sales in China, after the re-opening of the country’s economy. Meanwhile, topline for its property investment division continued to grow, driven mainly by IOI City Mall Phase 2.
However, segmental earnings before interest and tax shrank by 7% quarter-to-quarter, primarily due to higher electricity charges for the property assets as well as lower profit contributions from IOI Mall Xiamen. Net gearing inched up slightly to 0.70x, from 0.69x in the last quarter.
New property sales for the quarter reached RM443 million versus RM478 million in quarter two financial year 2023. Inventory sales made up 18% of nine months financial year 2023’s sales of RM1.37 billion. Projects in Malaysia contributed 83% of sales, while China and Singapore accounted for the remainder.
In Malaysia, the developer’s major sales contributors were IOI Resort City (RM164.6 million), Bandar Puteri Puchong (RM137.5 million), while sales in Johor (RM457.4 million) were driven mainly by Bandar Putra Kulai and Taman Kempas Utama.
Management indicated that about RM200 million worth of local projects there will be rolled out in quarter four financial year 2023. Upcoming launches in China are minimal, as the company will focus on clearing its unsold inventory of RM1.16 billion over the next 2-3 years. In Singapore, Marina View is on track to be launched in Oct 2023 despite challenges from the recent round of stamp duty hikes.
Unbilled sales rose slightly to RM554 million in quarter three financial year 2023 compared with RM489.2 million as at quarter two financial year 2023.
“RHB’s trading price is based on a 65% discount to revalued net asset value, with a lower 2% discount imputed, given our higher ESG score of 2.90 as IOIPG’s disclosure on its operating performance has improved, in our view,” said RHB.
