IOIPG: Strong Quarterly Performance Driven by Robust Property and Investment Sectors, Buy Rating Affirmed

A leading property group reported a significant increase in its normalised net profit for the first quarter of fiscal year 2026 (IQFY26), aligning with market expectations. The group’s revenue saw a substantial 41% year-on-year increase, primarily propelled by robust contributions from its property development and property investment divisions.

Performance Review

The group recorded a normalised net profit of RM162.3 million for IQFY26, representing a 117% jump year-on-year and a 52% increase quarter-on-quarter. This strong performance was largely attributed to improved property development margins, lower finance costs, and the full consolidation of Scottsdale Properties Pte Ltd following its acquisition in September 2025.

The property development segment posted a 47% year-on-year revenue increase to RM519 million, with operating profit more than doubling to RM155 million. This was supported by higher sales recognition in Malaysia and China, alongside an improved operating margin of 30%, reflecting a strategic shift towards higher-margin projects.

Similarly, the property investment segment saw its operating profit rise by 12% year-on-year to RM149.7 million. This growth stemmed from stronger contributions across its retail and office segments, notably higher occupancy at IOI Central Boulevard Towers (IOICBT), additional input from the newly acquired South Beach, and strong performances from key malls.

However, the hospitality segment experienced a 28% year-on-year decline in operating profit, reaching RM4 million, primarily due to initial start-up losses from the Sheraton Grand Xiamen Jimei, which began operations in March 2025. Stronger performances from other Malaysian hotels partly offset this impact.

Operational Highlights

The group achieved new sales equivalent to 24% of its RM2.0 billion full-year sales target, excluding Marina View, indicating it remains on track to meet its guidance. During the quarter, RM911 million worth of projects were launched, with industrial products making up 63% to capitalise on strong demand in that segment. Despite this, management reaffirmed that residential developments remain the core focus, targeting a 70:30 split between residential and commercial products.

In Singapore, the group recently launched the 683-unit W Residences Marina View, with approximately 10 units booked to date from the first phase release of 100 units. Marketing efforts are set to intensify to boost sales momentum.

IOICBT continued to show strong leasing momentum, with its commitment rate increasing to 95% from 88% and physical occupancy reaching 70%. Favourable easing of Singapore Overnight Rate Average (SORA) rates, which have reduced the group’s SGD loan rates, is expected to transform IOICBT into an earnings contributor from 2HFY26 by lowering its breakeven occupancy level.

Financial Health and Future Outlook

The group’s net gearing ratio increased to 0.95x from 0.7x in FY25, following a RM6.2 billion drawdown to finance the South Beach acquisition. Despite this, the management noted that easing SORA rates are beneficial, as 84% of its RM25.8 billion borrowings are denominated in SGD and tied to key Singaporean projects.

The group is also progressing towards a planned Malaysia REIT listing by end-CY26, which is expected to include IOI City Mall and selected office and hotel assets. This initiative aims to unlock asset value and support deleveraging efforts.

New property sales for IQFY26 grew 43% year-on-year but declined 30% quarter-on-quarter to RM474 million. Unbilled sales eased slightly to RM780 million from RM851 million in the preceding quarter.

Analyst’s View

TA Securities maintains its “BUY” recommendation for the company, with an unchanged target price of RM2.78 per share, representing a 25.9% upside from its last traded price of RM2.21. The target price incorporates a 3% ESG premium. The investment bank also maintains its FY26-28 earnings forecasts.