IOIPG: Property Developer’s Outlook Brightens on Cost Efficiency and Strategic Launches
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading property developer is poised for a significant earnings rebound, with analysts maintaining a “BUY” rating and a target price of RM0.25 (+25.0%), up from its last traded price of RM0.20. The positive outlook for the upcoming fiscal year (FY26) is primarily driven by substantial cost efficiencies and strategic project launches.
Performance Review
The company’s core net profit for FY25 saw a 44% year-on-year decline to RM388.4 million, largely due to the full expensing of interest costs post-completion of IOI Central Boulevard Towers (IOICBT). However, this drag is expected to ease considerably in FY26. Analysts project a sharp earnings rebound, with earnings per share (EPS) anticipated to grow by 73% year-on-year. This recovery is supported by easing interest expenses at IOICBT as SGD borrowing rates decline, stronger recurring income from investment and hospitality segments, and maiden contributions from new developments.
Cost Efficiencies and Financial Strength
A key factor underpinning the improved outlook is the significant reduction in borrowing costs. Management previously guided for SGD loan rates at 4.88% a year ago, but current SORA movements suggest rates are now below 3%. This translates into estimated annual interest savings of RM175 million, or approximately RM130 million after tax, which will partially offset higher group finance costs from recent acquisitions and new phase launches. The company also completed the acquisition of the remaining 50.1% stake in South Beach for SGD834.2 million, further strengthening its recurring income base.
Strategic Project Pipeline and Future Outlook
The developer has maintained its FY26 sales target of RM2.0 billion, representing a 10% year-on-year growth excluding its Marina View project. Sales are expected to meet expectations, bolstered by steady take-up rates in Malaysia’s mid-market and township segments. In China, aggressive repricing in the second half of FY25 successfully cleared unsold inventory and reignited buyer interest, despite a still-challenging environment.
Attention is now focused on the grand launch of W Residences Marina View in Singapore in October 2025. This flagship development, with a Gross Development Value (GDV) of SGD3.65 billion, is anticipated to be a significant catalyst for future sales and earnings. The company expects a 15% take-up rate within the first year, with potential for upside.
Recurring income is becoming increasingly prominent, contributing 42% of total revenue in FY25, a substantial increase from just under 20% in FY22. This growth is driven by positive rental reversions from properties like IOI City Mall and improved performance in the hospitality segment, benefiting from rising tourist arrivals and the lead-up to Visit Malaysia 2026. With stable cash flows, the company is also progressing towards a Malaysia REIT listing by end-CY26, followed by a Singapore REIT, leveraging its scale and quality to unlock further value.
