| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent research report from TA Securities highlights robust financial performance, with the company’s normalised net profit for the first half of FY26 (IHFY26) reaching RM362.9 million. This figure exceeded the analyst’s expectations and was broadly in line with consensus estimates, representing 54% of the full-year forecast. The strong performance was primarily attributed to significant contributions from its property investment division.
Performance Review
The company demonstrated impressive growth, with IHFY26 revenue soaring 42% year-on-year (YoY) to RM2.0 billion. Normalised net profit saw an even more substantial increase of 113% YoY, driven by strong growth across all key segments: property development (up 33% YoY), property investment (up 39% YoY), and leisure & hospitality (up 77% YoY).
For the second quarter of FY26 (2QFY26) specifically, revenue grew 7% quarter-on-quarter (QoQ) to RM1.04 billion, with normalised net profit climbing 24% QoQ to RM200.6 million. This was largely a result of the full-quarter consolidation of the South Beach Singapore assets, which had only partially contributed in the prior quarter, coupled with improved development margins. However, higher finance costs partially offset these gains.
Key Drivers and Efficiencies
The property investment segment emerged as the largest contributor to operating profit, benefiting from higher occupancy rates at IOI Central Boulevard Towers (IOICBT) and the full-period integration of IOI Mall Damansara and the South Beach Singapore assets. Property development margins expanded by 8.0 percentage points to 31.6%, supported by improved Malaysia township sales and revenue recognition from W Residences. The leisure & hospitality segment also saw improved earnings, bolstered by contributions from JW Marriott Singapore South Beach and the commencement of Sheraton Grand Xiamen. Unbilled sales strengthened to RM853 million from RM780 million in 1QFY26, indicating future revenue visibility.
Future Outlook
TA Securities anticipates that earnings momentum will strengthen further in the second half of FY26, underpinned by sustained recurring income from the property investment division. The hotel segment is expected to continue benefiting from initiatives like Visit Malaysia 2026, while efforts to narrow losses in China hotel operations are progressing. The Singapore portfolio, including IOICBT and South Beach Tower, is anticipated to transition from an earnings drag to a net contributor from 2HFY26, with committed occupancy rates at 96% and 85% respectively. The management is also advancing plans for a Malaysia REIT listing by the end of CY26, which aims to unlock value and support deleveraging by earmarking IOI City Mall and selected office and hotel assets for the initial portfolio.
Analyst Rating
Following the stronger-than-expected performance, TA Securities has revised its FY26, FY27, and FY28 earnings forecasts upwards by 13%, 15%, and 15% respectively. This adjustment reflects higher occupancy, improved rental assumptions, and enhanced NPI margins for property investment, along with revised occupancy and average room rate assumptions for the hospitality segment. The investment bank maintains its “BUY” recommendation, with a revised target price of RM0.25, suggesting a 25.0% upside from the last traded price of RM0.20.
