MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained a NEUTRAL call for IOI Properties Group Bhd highlighting a cautious outlook for the property developer despite the group's improved sales prospects.
The house noted that IOI Properties' 1QFY25 core net income of RM74.7 million is within expectations despite it made up 15% of MIDF Research's full-year forecast as it expects stronger earnings from the property investment division going forward following the commencement of the lease of Central Boulevard in Singapore.
IOI Properties' earnings for the quarter showed a sequential increase of 216% to RM74.7 million, recovering from higher depreciation and amortisation charges in the previous quarter.
However, on an annual basis, MIDF Research said its core net income plunged 57.3% despite a 6.1% increase in revenue, attributing this decline to a sharp rise in interest costs which soared to RM109 million in 1Q25 compared to RM356,000 in 1Q24. This surge is linked to the completion of Central Boulevard in Singapore in July 2024, which means interest expenses are no longer capitalised.
Meanwhile, MIDF Research noted that the group's property development division saw weaker contributions from domestic projects and developments in China. However, better performance from the property investment division, particularly IOI City Mall, cushioned the earnings decline. The research house believed this division will play a crucial role in driving future growth as it begins leasing space at Central Boulevard.
As for its new property sales in 1Q25, the research house said IOI Properties recorded a significant drop from RM550 million in 4Q24 to RM332 million.
However, MIDF Research said moving forward, IOI Properties' new sales momentum is expected to be supported by upcoming project launches in Malaysia, including the next phase of IOI Industrial Park @ Banting. Longer-term prospects appear brighter with the planned launch of Marina View Residences in Singapore, which is anticipated to bolster future sales.
Given these mixed factors, MIDF Research has maintained its earnings forecast for FY25/FY26/FY27F for IOI Properties with an unchanged target price of RM2.04.