I-Berhad’s steady momentum from previous quarters carried through into the new financial year, with a 1QFY24 net profit of RM4.1m (+>100% YoY, +11.1% QoQ) reported. Property development contributions remain relatively weak amid the lack of meaningful new launches, though income contributions are now appearing more broad-based with steady support from the property investment and leisure segments. Broadly meeting our estimates at 21% of full-year numbers, we leave our forecasts unchanged as we expect stronger quarters ahead on sustained traction from its growth initiatives. We continue to be encouraged by the Group’s steady fundamental improvements, with scope for longer-term upside still attractive as ~50% of its gross development value (RM5bn) has yet to be realized. We remain conservative on our developmentrelated earnings assumptions. We raise our call to Trading Buy nonetheless, on increased confidence in the consistency of the Group’s earnings recovery. Our target price is raised to RM0.32 (~50% discount to book value v.s. industry average of 40%).

• 1QFY24 overview. Property development revenue of RM8.0m (-53.3% YoY, -23.9% QoQ) is lower as the corresponding quarter last year included the sale of completed residential units (i-Suite and Hyde projects). Ongoing development costs for the BeCentral residential and 8Premier corporate/retail lots weighed on profitability however, with a segmental pretax loss of RM2.2m. Unbilled sales as at end-March is lower at RM97.2m (2023: RM94.5m) meanwhile. Property investment chipped in with another steady revenue contribution of RM5.9m (+3.5% YoY, +1.5% QoQ), supported by ongoing rental income from the Mercu Maybank corporate office tower, the data centre, its car parks as well as associate-related income (i.e. Central i-City mall). The Leisure segment saw sustained revenue contributions, amounting to RM25.9m (+25.8% YoY, -3.1% QoQ) due to the better-than-expected performance of the Double Tree Hilton hotel and various new product offerings. Segmental pretax profit remains encouraging at RM4.2m.

• Business overview. Immediate focus will continue to be on building and strengthening its property investment portfolio, which is then expected to eventually have cascading effects on its property development pipeline. RM100m has been allocated for this purpose, to be funded via a redeemable preference share issue (3% dividend rate) and to be wholly-subscribed by the Group’s major shareholder. This signifies a strong vote of confidence in the Group’s long-term prospects and is positive for minorities considering the non-dilutive nature of the exercise and lower cost vis-à-vis bank borrowings. Against the backdrop of recent hype on date centers and the property sector, it should be noted that the Group has a 7-acre plot of land identified for the construction of such, though not a priority at this juncture.

Source: PublicInvest Research - 4 Jun 2024