I-Berhad saw a notably better performance on a sequential basis with 3QFY23 net profit coming in at RM5.5m (+202.6% QoQ), though weaker compared to the similar period last year which included a one-off gain (RM15.1m) from a remeasurement of liabilities. Despite the somewhat expected stronger showing, cumulative 9MFY23 net profit of RM8.0m (-56.8% YoY) is still behind projections at 50% of full-year numbers, the discrepancy due to cost assumptions. We make adjustments to FY23/FY24/FY25 net profit estimates by -25.3%/+14.5%/-17.1% respectively to account for minor tweaks to billing assumptions, but mostly for higher costs (financing, in particular). We are encouraged by the Group’s steady fundamental improvements and sales momentum, albeit with limited impact considering only one ongoing development project at this juncture. Scope for longer-term upside is still attractive nonetheless, with ~50% of its gross development value (RM5bn) yet to be realized. I-Berhad’s long-term value is an attractive proposition, though we retain our Neutral call as we look towards further consistency in its earnings recovery. Our target price is unchanged at RM0.26 (on a significant 80% discount to RNAV and ~60% discount to book value).

• 3QFY23 earnings overview. Revenue recognition for the property development segment remained steady at RM17.0m (-9.4% YoY, +2.3% QoQ) for the quarter, underpinned by ongoing recognition of sales from its BeCentral residence project, as well as the Twenty8 and 8Premier corporate/retail spaces. Unbilled sales ended the quarter slightly higher at RM122.0m (end-June 2023: RM111.6m). 
  Property investment segment revenue of RM5.9m (+12.9% YoY, +7.8% QoQ) continues to be supported by improving traction in the Mercu Maybank corporate office tower, the data centre, its car parks as well as the Central i-City mall. The Group’s leisure segment is the surprise package with a better-thanexpected performance of the Double Tree Hilton hotel which is only in its first year of operations. Revenue contribution of RM21.1m (+51.7% YoY, +11.5% QoQ) is reflective of the Group’s growing attraction as a destination of choice.

• Business overview. Against the backdrop of a still-challenging development landscape amid higher interest rates, particularly for high-rise properties, the Group continues to invest into building its investment portfolio and leisure-related assets in efforts to improve visitor footfall and enhance yields. RM10m spent on enhancing visitor experiences via new attractions will come to fruition next month, coinciding with the year-end school holidays. Contributions from the ongoing BeCentral residences continues afoot meanwhile, with sales momentum remaining encouraging.

Source: PublicInvest Research - 29 Nov 2023