This article first appeared in The Edge Financial Daily on April 3, 2019

IOI Properties Group Bhd
(April 2, RM1.32)
Initiate buy with a fair value of RM1.88: IOI Properties Group Bhd is one of the largest property developers in Malaysia with a proven track record spanning more than three decades in property development.

Its principal activities are property development, property investment, and hospitality and leisure. We expect the company to register core net earnings of RM677.3 million, RM699.2 million and RM728 million for financial year ending June 30, 2019 (FY19), FY20 and FY21 respectively.

For FY18, its property development division contributed 81% of the group’s revenue and 61% of its profit before tax (PBT). At present,  IOI Properties has a land bank of approximately 10,000 acres (4,047ha) in various locations such as Malaysia, Singapore and China, bearing a total estimated gross development value of over RM60 billion. The property development in China and Singapore is expected to deliver strong contributions to IOI Properties in the short- to medium-term due to strong take-up rates.

IOI Properties’ property investment portfolio comprises mainly retail and office space with a total net lettable area of approximately 6.7 million sq ft. This division contributed 12% of IOI Properties’ revenue and 18% of its PBT for FY18.

Its main investment properties include IOI City Mall, Putrajaya, IOI Malls (Puchong, Selangor and Johor Baru), One and Two IOI Square, Putrajaya, Puchong Financial Corporate Centre and IOI Boulevard Puchong. Meanwhile, Central Boulevard in Singapore is in the pipeline with construction of the main building expected to commence by the fourth quarter of FY19.

Going forward, IOI Properties’ property investment division will be enhanced by the completion of 1.5 million sq ft of retail and office area at Central Boulevard, Singapore in 2022; and 2.37 million sq ft of retail area in a shopping mall at IOI Palm City in Xiamen, China in 2020/2021.

IOI Properties’ hospitality and leisure portfolio consists of hotels, resorts and golf courses located in the Klang Valley, Johor and Singapore, namely Putrajaya Marriott Hotel; Sheraton Puchong; Palm Garden Hotel; Palm Garden Golf Club; IOI Palm Villa Golf and Country Resort; Le Méridien Putrajaya and JW Marriott Hotel Singapore.

This division made up 7% of IOI Properties’ revenue and 3% of its PBT for FY18.

The company’s hospitality and leisure earnings will be boosted by the addition of a 360-room five-star hotel at IOI Palm City in Xiamen, China by the end of 2021.

We believe the outlook for IOI Properties is positive anchored by a strong contribution from its property development projects, particularly in China and Singapore, stable income from property investments and its growing leisure and hospitality business. — AmInvestment Bank, April 2