Weaker China Sales Drag For IOI Properties
MIDF notes that IOI Properties Group 1HFY24 core net profit of RM295.6m came below expectations, making up 42% and 39% of its and consensus full year estimates respectively. The negative deviation was mainly due to the weaker earnings contribution from overseas projects.
Sequentially, 2QFY24 core net income was lower at RM121.2m in line with lower topline. The house of view the weaker earnings were mainly due to lower earnings contribution from project in China amid weaker property market in China. Besides, the lower earnings were also due to weaker contribution from Singapore joint ventures. On yearly basis, 2QFY24 core net income was lower (-42.6%yoy), bringing 1HFY24 core net income lower at RM295.6m (-28.2%yoy). The unexciting earnings were mainly due to weaker contribution from property development division.
Nevertheless, the earnings decline was partly cushioned by improved performance of property investment division which supported by rental contribution from IOI City Mall Phase 2. Flattish new sales outlook. IOI Properties Group recorded new sales of RM582m in 2QFY24 which inclusive of two land sales in Johor and Malacca amounting to RM365m. Excluding the land sales, new property sales in 2QFY24 stood at RM222m as compared to property sales of RM587m in 1QFY24. That brought total new property sales to RM804m.
Looking ahead, new sales outlook for FY24 is expected to be flattish against new sales of RM1.96b in FY23 as launch of Marina View Residences in Singapore may reschedule due to potential change in planning. Meanwhile, unbilled sales increased to RM722m in 2QFY24 from RM509m in 1QFY24.
The house downgrades the stock to NEUTRAL with an unchanged TP of RM2.15. MISF revised its earnings forecast for FY24F/25F/26F by -9%/-17%/-13% as it factored in weaker contribution from overseas projects.
Nevertheless, the house sees positive long-term prospect for IOI Properties which will be driven by launch of its Marina View Residences in Singapore. Besides, potential listing of its investment properties will unlock value of its investment properties.