IOI Properties Group Bhd
(April 21, RM2.19)
Initiate buy with a target price (TP) of RM2.49: IOI Properties Group Bhd came back with a leaner structure comprising three core segments, which are: (i) property development; (ii) property investment; and (iii) leisure and hospitality. We favour the group for: (i) its current share price trading at a discount of approximately 36% to its net tangible assets (NTA) per share of RM2.97; (ii) land bank reserve of around 10,000 acres (4,047ha) that will last the group for the next 10 years with potential gross development value (GDV) of RM50 billion; (iii) possible easier land bank replenishment with backing from IOI Corp Bhd and the township projects being the bread and butter for the group.
We derive a TP of RM2.49 based on a blended price-earnings ratio and price-to-book value premised on our financial year ending June 2016 forecast. We initiate coverage on IOI Properties with a “buy” rating.
Currently, the ongoing and upcoming projects from the township segment will contribute approximately 53% of the total projected GDV of RM16 billion for the next three years.
We expect its two new townships — Bandar Puteri Warisan Sepang (332 acres) and Bandar Puteri Bangi (360 acres) — to sustain sales going forward. Sales for Bandar Puteri Bangi, Phase 1 have hit 70% since its launching in January.
Earnings are well supported too. There are strong unbilled sales of RM1.45 billion and approximately RM16 billion GDV of ongoing and upcoming projects to sustain sales for the next three years.
In addition, IOI Properties is also enjoying higher-than-industry-average margins attributed to its low land costs with no hurry to expand its land bank anytime soon.
We favour IOI Properties for: (i) its healthy balance sheet with NTA per share of RM2.97 and its total GDV of RM16 billion in the pipeline for the next three years; and (ii) its massive land bank measuring almost 10,000 acres sustaining over the next 10 years. — BIMB Securities Research, April 21
This article first appeared in The Edge Financial Daily, on April 22, 2015.