IOI Properties’ 2H sales to stay strong — analysts

KUALA LUMPUR (Feb 23): IOI Properties Group Bhd’s sales is expected to remain strong in the second half of the financial year ending June 30, 2017 (2HFY2017) on the back of its Trilinq condominium project in Singapore, said analysts.

Affin Hwang Investment Bank Bhd, in a note yesterday, said IOI Properties will be launching Trilinq’s last phase during this period.

“Unbilled sales of RM1.62 billion as at end-2016 should sustain revenue going forward,” said Affin Hwang.

IOI Properties’ overall new property sales in the second quarter (2Q) of FY2017 rose to RM795 million, from RM731 million in 1QFY2017, bringing 1HFY2017 sales to RM1.5 billion.

This, noted Hong Leong Investment Bank Bhd, accounted for 66% of full-year sales target of RM2.3 billion.

“The new sales were contributed mainly from Singapore (40%), Malaysia (53%) and China (7%). Higher sales from Singapore were due to stronger sales from Trilinq with the latest take-up rate of 80% (out of 600 units),” it added in a note yesterday.

IPI Properties is also expected to launch projects in Malaysia in 2HFY2017, including Skyz Residence, Le Pavilion condominiums and Palmyra in Bandar Puteri Bangi.

On Tuesday, IOI Properties reported a 10% year-on-year (y-o-y) increase in net profit to RM463 million for 1HFY2017, which was above market expectations.

Net profit for 2QFY2017, however, registered an 11% drop to RM273.53 million, from RM307.17 million a year earlier.

Nevertheless, the group’s property development segment saw its 2QFY2017 revenue climbing 36% to RM1.07 billion — with an operating profit of RM337.5 million, up 23% y-o-y — thanks to higher sales take-up rates for its projects, including the ones in Singapore.

RHB Investment Bank Bhd has upgraded IOI Properties to “buy” from “neutral” in view of the group’s strong earnings and resilient income from its property investment division.

“IOI Properties could potentially surpass its RM2.2 billion sales target for FY2017 … We raise our FY2017-FY2019 earnings forecasts by 11% to 15%, as the earnings from its property development segment were stronger than expected,” said RHB.

Still, there is concern with regard to the group’s net gearing, which had increased to 39% in 2QFY2017 from 14% in 4QFY2016 after it obtained additional bank borrowings to finance the 1.09ha tract of land in Central Boulevard, Singapore.

With the land in hand, IOI Properties would be able to make an entry into prime office development in Singapore’s central business district.

The group paid a deposit of RM2.4 billion for the land, which it had won in a bid at a tender price of S$2.57 billion (RM8.07 billion). Its one-for-four rights issue, which will raise up to RM1.53 billion, will be used partly to pay for the acquisition.

“We estimate the net gearing will increase to 60% after the land acquisition and rights issue,” said Affin Hwang.

This article first appeared in The Edge Financial Daily, on Feb 23, 2017.

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