IOI Properties jumps 10.69% to one-year high

KUALA LUMPUR (Dec 10): Shares of IOI Properties Group Bhd rose as much as 10.69% this morning to a one-year high.

At 11.52am, the counter was up 17 sen at RM1.76 after 20.98 million shares were traded, valuing it at RM9.69 billion — putting it at ninth place on the top gainers list as at the time of writing.

The stock has shot up 105% from its trough of 86 sen on March 18.

Hong Leong Investment Bank (HLIB) Research has maintained its "buy" call on IOI Properties Group Bhd with a higher target price of RM1.76 (from RM1.10), based on a lower discount of 60% to a realisable net asset value of RM4.32 as the research house's previous estimates were too conservative.

HLIB Research analyst Andrew Lim Ken-Wern said the research house remains confident of IOI Properties' outlook given the strong response in its products and potential land banking activities in China coupled with ongoing efforts to increase its recurring income base.

"We also see value in the stock given its ability to heavily outperform its peers over the past two quarters during the ongoing pandemic alongside its ability to sustain strong net margins of 20%-30%. At current prices, the stock trades at an undemanding 0.4x P/B (which is -1SD below its five-year mean)," he said in a note today.

Commenting on the outlook of the group, the analyst expects IOI Properties' sales and launch targets for the financial year ending June 30, 2021 (FY21) to be able to record similar levels year-on-year.

"For illustrative purposes, 1QFY21 (ended Sept 30, 2020) saw sales and launches worth RM473 million and RM640 million, respectively, which form about 25% of FY20 figures. Unbilled sales stood at RM562.8 million as of 1QFY21 (cover ratio of 0.34x) but we note that the cover ratio has always been hovering below the 0.5x levels (over the past years)," said Lim.

Despite this, Lim said earnings for the group are still sustainable as they are supported by the sales of completed inventory and projects in China which are launched once construction progress is at least 50%.

This in turn directly translates into earnings upon conversion of bookings to sales, the analyst noted.

"Earnings will also be supported by efforts to clear completed inventory which is worth just over RM2 billion as of 1QFY21. Management notes that the incentives and promotion given for such properties are very much contained, as seen in its ability to consistently record net margins of 20%-30% over the past years up until now," added Lim.

To recap, IOI Properties' net profit in 1QFY21 rose 16.9% to RM192.11 million, from RM164.39 million a year earlier, while its revenue improved 22.1% to RM659.67 million from RM540.32 million.

Lim said the group's 1QFY21 results were above HLIB Research's expectations largely due to higher-than-expected sales recognition from China and completed inventory sales.

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