I-Bhd (Sept 26, 51 sen)
Maintain neutral with a lower target price (TP) of 53 sen: We recently organised a presentation made by I-Bhd’s representative (represented by non-executive independent director Ooi Hun Yong) to RHB remisiers and dealers. During the session, the management still expects to see earnings growth this year, given unbilled sales of RM305 million. Meanwhile, construction progress of Central Plaza @i-City is slightly behind schedule — it is now expected to be launched in Jan 2019.
Of its 72 acres (29.1ha) of land in Shah Alam, 50% has been developed. The balance is still under construction, and carries a total remaining gross development value (GDV) of RM6 billion. Overall, the development of i-City — expected to be completed by 2025 — will feature residential, commercial and leisure properties within a single location.
The management is not actively looking for landbanking opportunities and will remain focused on i-City. It is also exploring opportunities to expand i-City’s GDV by buying surrounding land, redeveloping low-rise areas, and transforming the project into a transit-oriented development.
The management said it may postpone the opening of Central Plaza @i-City mall. The mall, jointly developed with Thailand’s Central Pattana (CPN TB, buy, TP: 95.00 baht) with a 60:40 stake, was originally slated to be launched in 4Q18. However, we understand that construction work is slightly behind schedule — so it will likely be opened only in Jan 2019.
The management is confident that the mall will be able to attract quality tenants, as Central Pattana has over 30 years of experience in retail development. Currently, the mall has a committed occupancy rate of around 70%, and I-Bhd aims to hit 85% before the launch date. Anchor tenants include Sogo, Village Grocer and TGV.
Next year, the management expects to launch Hill 11 residence (GDV: RM278 million), Hill 12 residence (GDV: RM281 million) and smart offices (GDV: RM230 million). Meanwhile, its other investment properties — Technology Office Tower (261,000 sqf) and a 2,000-seat convention hall — are also expected to be completed in late 2019.
We maintain “neutral”. We maintain our earnings estimates but cut our TP to 53 sen (from 57 sen, 6% upside) as the outlook for the property market will likely remain challenging, in view of policy uncertainties after the general election. Upside risks to our call include a sharp recovery of the property market due to positive changes in government policy, while reverse scenarios would represent downside risks. — RHB Research Institute, Sept 26
This article first appeared in The Edge Financial Daily, on Sept 27, 2018.