I-Berhad reported a sequentially better net profit of RM1.8m (+19.8% YoY, +170.1% QoQ) for 2QFY23, lifted by improved contributions from the property investment segment. Cumulative 1HFY23 net profit of RM2.5m (-14.1% YoY) remains underwhelming and missing projections at only 16% of full-year numbers, though we continue to leave forecasts unchanged for now on the expectation of stronger recognitions from both its development and investment segments in the quarters ahead. Sales momentum remains encouraging, albeit limited with only one ongoing project at this juncture. Scope for longer-term upside is still attractive nonetheless, with ~50% of its gross development value yet to be realized, timing notwithstanding. I-Berhad’s long-term value is an attractive proposition, though we retain our Neutral call as we look towards further earnings recovery, and consistency. Our target price is unchanged at RM0.26 (based on a significant 80% discount to RNAV and ~60% discount to book value).

• 2QFY23 earnings overview. The property development segment saw another quarter of steadier revenue at RM16.6m (+>100% YoY, -2.7% QoQ), underpinned by continued recognition of sales from its latest project, BeCentral residences, the Twenty8 and 8Premier corporate/retail spaces and from completed residential units in the i-Suite and Hyde projects. The first tower of BeCentral is nearing 50% sales (1QFY23: 42% of its total 474 units). Segment pretax profit of RM1.2m (+>100% YoY) is higher, mainly due to higher recognition of work progress Unbilled sales is also higher at RM111.6m as at end-June (Mar 2023: RM94.5m).
  Property investment segment revenue of RM5.5m (+18.2% YoY, -4.8% QoQ) is supported by its corporate office tower, Mercu Maybank, and the data centre. Segment pretax profit is correspondingly higher at RM1.9m (+19.1% YoY, +80.0% QoQ).
  While the leisure segment continues to record healthy improvements in revenue (+84.0% YoY, -8.2% QoQ) to RM18.9m as the Double Tree Hilton hotel makes further inroads financially, ongoing start-up costs for the hotel continues to be a drag on segmental pretax earnings however, with a pretax loss of RM200,00o reported this current quarter.

• Business overview. While contributions from the ongoing BeCentral residences continues afoot, the Group will also invest into its Leisure Segment in efforts to improve visitor footfall and enhance yields on its investment assets with RM10m allocated to this end. Longer-term, the Group has a remaining RM5bn development pipeline which will keep it occupied over the coming decade.

Source: PublicInvest Research - 30 Aug 2023