Works back on track for I-Bhd

I-Bhd (Feb 17, 18.5 sen)

Maintain outperform call with an unchanged target price (TP) of 91 sen: I-Bhd’s numbers for 2016 came in below our expectations, with revenue and net profit at only 76% and 78% of full-year estimates respectively, in some part due to certain construction delays which hampered billing progress while also being affected by the slower rate of approvals for mortgage loans.

Works are back on track and slated for completion by the first quarter (1Q) of financial year 2017 (FY2017). While we conservatively lower our FY2017 and FY2018 revenue expectations between 13% and 15% to account for changes in our billing assumptions, net profits are adjusted a lower 5% to 7% on account of better margins.

We continue to like I-Bhd’s value proposition and attractive location and see it still being in a prime position to benefit from the urbanisation of the outer Klang Valley region (Klang and Shah Alam) despite ongoing challenges in the property market.

Our “outperform” call is reaffirmed with an unchanged TP of 91 sen based on a circa 50% discount to revalued net asset valuation. With less than 25% of its gross development value (GDV) crystallised, I-Bhd’s story is only just unfolding.

Full-year revenue recorded a 49% year-on-year (y-o-y) jump to RM383.6 million, underpinned by contributions from its property development segment (+70.4% y-o-y). Net profit recorded a stronger 59.4% y-o-y growth to RM66.6 million as margins improved.

The property investment segment remains a work-in-progress however, with its current performance affected by the expiry of its Ijarah agreement with Al Rajhi Bank in late-2015. A decrease in visitor count to the theme park affected performance in the leisure segment.

The i-SoHo and i-Suite developments are fully sold while the Liberty and Parisien Towers projects have achieved an average of 80% sales. The Hyde Towers development launched last year is close to being half sold in spite of current market conditions. Unbilled sales are at an encouraging RM573.3 million, with new sales of RM333 million recorded during the year versus an estimated RM350 million in 2015.

This consistency bears testament to its product value and the market segment it serves which is still seeing demand. While sales numbers of 8 Kia Peng at the Kuala Lumpur City Centre remain relatively anaemic, we expect an improvement in market conditions to lift contributions progressively.

Works on the CentralPlaza@i-City mall (pictured) have progressed to the structural stage, the same for the DoubleTree by Hilton hotel, with both on track for completion by end-2018 and becoming integral parts of its planned RM1 billion property investment portfolio, also encompassing wholly-owned car park bays (circa 10,000) anticipated to yield steady streams of healthy recurring income by end-2018.

Slated for launch in 2Q 2017 is a 19-storey 204-unit fully-furnished residential development project sited above the DoubleTree by Hilton hotel dubbed “Converse @ i-City” given its integration of the Internet of Things functionalities. GDV is estimated at about RM120 million. — PublicInvest Research, Feb 17

This article first appeared in The Edge Financial Daily, on Feb 20, 2017.

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