Key takeaways from the 3Q24 results briefing are as follows:

4Q24 Performance to Remain Consistent with 3Q Levels

To recap, Ibraco delivered a strong 3Q24 performance with net profit climbing to RM15.3mn, more than double the 2Q24’s RM6.2mn, driven by significant progress in new projects across both the property development and construction segments. Notably, the construction division's 3Q24 PBT surged to RM14.3mn, a significant increase from 2Q’s RM4.3mn. This growth was primarily supported by accelerated progress on the Sarawak Government’s building project, which advanced from 50% to 69% completion, and the Kuching Urban Transportation System (KUTS) Blue Line-Package 1, which improved from less than 5% to 14% completion following utility relocation approvals that facilitated rapid work catch-up.

Looking ahead, we expect 4Q24 performance to remain consistent with 3Q levels, driven by continued acceleration in construction progress across both segments. Therefore, we consider Ibraco's 9M24 net profit of RM26.8mn, which represents 63% of our full-year projections, to be in line with our expectations.

Revised FY24 Sales Target to RM350mn from RM400mn Previously

In 9M24, the group rolled out new launches worth RM950mn, including commercial and residential apartments at Arden City in Kota Samarahan (GDV: RM421mn) and Residensi NewUrban in Petaling Jaya, an affordable serviced apartment project (GDV: RM529mn). Both developments recorded a 35% takeup rate. However, despite the solid booking numbers, Ibraco recorded only RM133mn in new sales for 9M24 due to delays in securing loan financing, which slowed the conversion of bookings into sales. In response, management revised the full-year sales target to RM350mn from the original RM400mn. Encouragingly, management noted that booking conversions have improved in 4Q, which is expected to support the achievement of the revised target.

Remain Active in Bidding New Construction Jobs

Ibraco’s current outstanding orderbook of RM1.1bn provides a solid earnings outlook for its construction division through FY27. Despite this, Ibraco continues to actively bid on new projects, reflecting its commitment to growth. With a proven track record in diverse infrastructure projects, Ibraco is wellpositioned to capitalise on Sarawak's extensive infrastructure plans, which aim to achieve developed state status by 2030. According to management, Ibraco’s active tender book stands at RM1.5bn, including bids for the KUTS and water supply grid program.

Forecast

We have revised our FY24 new property sales assumption to RM350mn, down from RM450mn, aligning with management’s guidance. Meanwhile, our FY25-26 property sales projections remain unchanged at RM500mn annually. Additionally, we have updated progress billings for construction contracts to reflect the latest developments. As a result, our FY24/25/26 earnings forecasts have been adjusted by -3%/+7%/+2%.

Valuation

Factoring in the revised earnings, we arrive at a new target price of RM1.45 (previously RM1.36), based on SOP valuation. Maintain Buy.

Source: TA Research - 2 Dec 2024