IOI Properties shares up in early trade
At 10.35am, IOIPG shares gained two sen to RM2.21 with 465,300 shares traded.
In a research note today, CGS International Securities Malaysia Sdn Bhd views IOIPG as an undervalued structural growth story, underpinned by a 15.6 per cent compound annual growth rate in financial years 2024-2027 forecast core earnings per share, driven by the expansion of its investment property portfolio and incremental earnings contribution from W Residences.
There is also the potential improvements in its gearing from the monetisation of its investment properties via REIT listings and improving earnings quality with resilient recurring income.
"IOIPG stands to benefit from accelerated growth in property demand in Johor, driven by the Johor-Singapore Special Economic Zone (JS-SEZ), thanks to its landbank of over 1,214 hectares (3,000 acres)," it said.
Following the recent addition of new investment properties and the commencement of IOI Central Boulevard Towers (ICBT) in July 2024, IOIPG's earnings quality has improved markedly, with increased contributions from its recurring income assets, it said.
"We also expect the ongoing acquisition of the remaining 50.1 per cent stake in South Beach development for S$834.2 million (RM2.75 billion) to be earnings-accretive despite the potential rise in near-term gearing.
"We estimate that earnings before interest and tax (EBIT) contributions from its property investment segment will rise meaningfully to 47 per cent of group EBIT by FY2027 forecast from 24 per cent in FY2018, the highest among our Malaysia property coverage, making IOIPG less susceptible to fluctuations in property development earnings and narrowing the deep discount to revalued net asset value," it said.
According to recent media reports, IOIPG is exploring two REIT listings, one for Malaysian assets worth RM7 billion to RM8 billion and another for Singapore-based assets worth S$7 billion to S$8 billion (RM23 billion to RM26 billion).
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