• Maintain BUY, with new MYR2.50 TP from MYR2.10, 31% upside and c.3% FY24F (Jun) yield. IOI Properties’ Bandar Putra Kulai should continue driving property sales as industrial activities in that area are expected to pick up further. Additionally, an LRT station could potentially be located at the Senai International Airport. IOIPG still has 3,474 acres of undeveloped land there (67% of total portfolio balance). We raise our TP on improved market sentiment and better demand for property this year. Our valuation is now based on a 50% discount to RNAV (from 55%).

• Bandar Putra Kulai a major sales driver. Bandar Putra Kulai is a 25-year old township developed by IOIPG. We expect the township to drive the company’s property sales in the coming years given the ongoing and upcoming developments in the surrounding area. These include the development of the YTL Green Data Centre Park (30 min away), and a potential LRT station at the Senai International Airport (15 min away). In addition, the group has sold 404 acres from its non-core land in Kulai to Eco World (ECW MK, NR) in September last year for industrial development. All these developments will likely further create a natural demand for properties in the area. Note that Bandar Putra Kulai achieved record sales of MYR525m in FY23 (double from MYR250m in FY22) and contributed 27% of IOIPG’s total sales of MYR1.96bn in FY23. IOIPG’s FY23 sales in the Johor region have also grown from MYR515m in FY22 to MYR772m (+55% YoY).

• Expecting strong performance for retail and hospitality property assets. IOIPG currently has a total retail space 8.49m sqf and five hotels (1,876 rooms) and another three hotels to be added into its portfolio. We believe the group’s retail malls and hotels in Putrajaya will see strong performance ahead. Apart from the seasonal festive boost, IOI City Mall and the surrounding hotels are expected to benefit from the return of tourists spurred by the 30-day visa free incentive for China and India travellers.

• IOI Central Boulevard to open in mid-2024. Over in Singapore, Jun-Jul 2024 will see the opening of IOIPG’s first Grade A Green Mark Platinum office tower. Committed lease to date is at 40%, while another 20% is currently in advanced negotiation. These are high profile international tenants. We are confident that the take-up rate for the office space will surge when the building is closer to completion over the next few months. The office building will be the group’s major earnings kicker from FY25F. Assuming an occupancy rate of 80% and given the average rental of SGD13 psf, the building could potentially generate MYR450-480m of rental income to IOIPG per year.

• Marina View to be launched in February. With an ASP of c.SGD3,000 psf, we expect mediocre response for this project due to the cooling measures imposed by the Singapore Government last year. However, any sales from Marina View are expected to have a lumpy contribution given the sheer size of this project.

Source: RHB Research - 15 Jan 2024