IOI Properties posts lower 1Q profit on absence of fair value gain, weaker property development earnings

• Quarterly revenue slipped 6.3% to RM648.05 million from RM691.52 million, its bourse filing showed, amid lower contribution from its property development business in Malaysia and weaker sales in China.

KUALA LUMPUR (Nov 24): IOI Properties Group Bhd posted a net profit of RM174.45 million for its first quarter ended Sept 30, 2023 (1QFY2024), down 72.8% from the RM640.29 million it made in the corresponding quarter last year, mainly as the previous year had included a fair value gain on investment property amounting to RM470.41 million, on top of lower revenue.

Quarterly revenue slipped 6.3% to RM648.05 million from RM691.52 million, its bourse filing showed, amid lower contribution from its property development business in Malaysia and weaker sales in China.

"Nevertheless, the weaker performance of the property development segment is partially offset by the significant improvement in the property investment segment. This demonstrates the group’s agility and robustness in enhancing the performance cycle of its diverse business segments in a fluctuating economic cycle," IOI Properties said in a bourse filing.

The group said it made a profit before tax (PBT) of RM225.5 million for 1QFY2024, down 11% from last year's underlying PBT of RM254.2 million — if the impact of the fair value gain on investment together with an impairment loss on property, plant and equipment are excluded.

Compared to the immediate preceding April to June quarter, the group’s net profit has dropped 25.89% from RM235.37 million, as revenue dipped 2.76% from RM666.46 million.

The group achieved sales of RM587 million under its property development business in 1QFY2024, with local projects contributing RM572.6 million or 98% of total sales, while its China projects contributed the remaining RM14.4 million or 2%. The group launched RM1.13 billion worth of properties in 1QFY2024.

The largest contributor to local sales was the Johor region, with RM400.5 million, led by the sale of agriculture land at Kulai while established townships at Bandar Putra Kulai and Taman Kempas Utama continued to outperform, it said, referring to the RM211.07 million cash sale of the asset to Eco World Development Group Bhd that it announced in September.

"The sale of the agriculture land at Kulai, which is expected to be completed in the current financial year, bodes well for IOI Properties as it allows swift monetisation of future land bank which has no immediate development plan and the cash proceeds can be redeployed for working capital purposes," the group said.

Going forward, IOI Properties expects its China segment to remain subdued as the economic recovery there has been weaker than expected.

"We are cognisant that the operating environment both within and outside Malaysia will continue to face some headwinds. However, our wide property product offerings diversified across three countries (Malaysia, China and Singapore), recurring earnings from established property investment portfolios and improving prospects for the hospitality and leisure segment will provide the group with a strong foundation for sustained earnings ahead,” said IOI Properties group chief executive officer Lee Yeow Seng.

“In addition to strategically timing our launches to obtain a good take-up rate, IOI Properties remains focused on reducing the inventories further with promotional sales campaign such as IOI Buy with Tenant Program 2.0,” he added.

Shares in IOI Properties settled one sen or 0.58% higher at RM1.73 on Friday (Nov 24), with a market capitalisation of RM9.53 billion. The counter has risen over 60% year-to-date.

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