The Group managed to remain in the black, though barely, with a 3QFY20 net profit of RM0.9m (-83.2% YoY, +85.7% QoQ) adding to a cumulative 9MFY20 net profit of RM2.5m (-89.5% YoY) which remains below expectations at only 20.0% of full-year estimates however. Weakness in the investment property (mall) and Leisure (theme park) segments as a result of the COVID-19 pandemic have weighed significantly, as has the lack of launches since 2018. Re-imposition of the Conditional Movement Control Order (CMCO) will impact 4QFY20 numbers, compelling us to cut FY20/FY21/FY22 estimates by 55.0%/35.2%/25.8% as we also make changes to billing assumptions. Potential earnings uplift could come from the clearing of its current inventory of completed properties totaling about RM600m. While near-term prospects are likely to remain hazy in light of the current operating challenges, we still like IBerhad’s long-term value proposition underpinned by a remaining ~60% of its gross development value in Shah Alam yet to be realized. Our unchanged target price of RM0.26 (based on an already-steep 80% discount to fullydiluted RNAV) appears to provide significant price performance upside. We retain our Neutral call nonetheless given the lack of near-term re-rating catalysts.

• 3QFY20 earnings overview. Property development pretax profit of RM2.8m (-86.1% YoY, -50.6% QoQ) continues to underpin Group earnings, segment-wise though contributions are still from sales of completed units given the absence of new launches since 2018. The property investment segment registered a pretax loss of RM0.9m (-90.4% YoY, -81.1% QoQ), seeing brief respite during the Recovery MCO period. The leisure segment recorded a marginal RM0.1m pretax gain (-94.7% YoY, +>100% QoQ) for the same reasons. Property unbilled sales has slipped further to RM45.5m as at end-September (June: RM63.3m).
• Business overview. We gather that the Group is gearing up to launch a residential tower block worth ~RM300m by this year-end, confident on the value proposition of its product offering. The Group will also focus on its property investment portfolio despite the longer gestational periods. With its Grade-A GBI-rated office tower completed, works continue afoot on its second convention centre and Double Tree by Hilton Hotel, both slated for completion and opening in 3QFY21.
• Upside to earnings could come from the disposal of RM600m worth of completed properties in Shah Alam and downtown Kuala Lumpur. A quicker-than-expected recovery from the COVID-19 pandemic will also alleviate concerns over its mall, hotels and theme park exposures, reducing the drag on Group earnings.

Source: PublicInvest Research - 27 Nov 2020