KEY INVESTMENT HIGHLIGHTS

• FY24 earnings below expectations
• Weaker earnings in FY24
• FY24 new sales at RM2.14b
• Shenton 101 proposal not accepted
• Earnings forecast revised downwards
• Maintain NEUTRAL with a revised TP of RM2.04

FY24 earnings below expectations. IOI Properties Group (IOIPG) FY24 core net profit of RM541.1m came below expectations as it made up 76% and 77% of our and consensus estimates respectively. The negative deviation was mainly due to the higher-than-expected depreciation charges and lower than expected margin in 4QFY24. IOIPG announced a dividend of 5sen per share which translates into a dividend yield of 2.6%.

Weaker earnings in FY24. Sequentially, 4QFY24 core net income plunged to RM23.6m (-89.3%qoq) as earnings in 3QFY24 were boosted by land sale. The lower earnings in 4QFY24 were also due to higher depreciation and amortisation charges which jumped to RM101m in 4QFY24 from RM19.9m in 3QFY24 mainly arising from Palm Garden Hotel. Besides, earnings were impacted by lower margin which saw core EBIT margin narrowed to 17.1% in 4QFY24 from 25.1% in 3QFY24. On yearly basis, 4QFY24 core net income was lower (-78%yoy), bringing FY24 full year core net earnings lower at RM541.1m (-15.5%yoy). The lower earnings were mainly due to lower contribution from property development segment which partly was dragged by weak property market condition in China. Nevertheless, the improved performance of property investment division partially cushioned the earnings decline as rental income from IOI City Mall Phase 2 was encouraging.

FY24 new sales at RM2.14b. IOIPG registered new sales of RM550m in 4QFY24, lower than new sales of RM789m in 3QFY24 as IOIPG booked in Johor land sales of RM211m in 3QFY24. That brought total new sales to RM2.14b in FY24. Local projects contributed to 90% to total new sales in FY24 while oversea projects in China and Singapore contributed to 9% and 1% respectively. New sales in Malaysia were mainly contributed by its projects in IOI Resort City in Putrajaya and township at Bandar Puteri Puchong. Looking forward, new sales prospect for FY25 is expected to be better as IOIPG targets to launch Marina View Residences in Singapore in FY25. Meanwhile, unbilled sales increased marginally to RM717m in 4QFY24 from RM688m in 3QFY24.

Source: MIDF Research - 29 Aug 2024