KUALA LUMPUR: PublicInvest Research anticipates stronger upcoming quarters for I-Berhad due to sustained momentum from its growth initiatives, upgrading the stock to a 'buy'.
"We continue to be encouraged by the group's steady fundamental improvements, with scope for longer-term upside still attractive as about 50 per cent of its gross development value (RM5 billion) has yet to be realised," the firm said in a note.
Despite maintaining a conservative stance on its development-related earnings assumptions, PublicInvest highlighted I-Berhad's strong performance continuing into the new financial year.
The company reported a first-quarter 2024 (1QFY24) net profit of RM4.1 million, marking over 100 per cent year-on-year (YoY) growth and an 11.1 per cent increase quarter-on-quarter (QoQ).
Despite revenue falling from RM44.5 million to RM40.6 million, the profit growth reflects effective financial management and strategic planning.
"Property development contributions remain relatively weak amid the lack of meaningful new launches, though income contributions are now appearing more broad-based with steady support from the property investment and leisure segments," PublicInvest said.
The property development revenue of RM8 million (-53.3 per cent YoY, -23.9 per cent QoQ) was lower, attributed to the previous year's sale of completed residential units (i-Suite and Hyde projects).
Ongoing development costs for the BeCentral residential and 8Premier corporate/retail lots impacted profitability, resulting in a segmental pre-tax loss of RM2.2 million.
Unbilled sales at the end of March were RM97.2 million, slightly higher than the RM94.5 million recorded in 2023.
The property investment segment delivered a stable revenue contribution of RM5.9 million (+3.5 per cent YoY, +1.5 per cent QoQ), driven by ongoing rental income from the Mercu Maybank corporate office tower, the data centre, car parks, and associate-related income such as Central i-City mall.
The leisure segment saw sustained revenue contributions of RM25.9 million (+25.8 per cent YoY, -3.1 per cent QoQ) due to the strong performance of the DoubleTree Hilton hotel and various new product offerings.
"Segmental pre-tax profit remains encouraging at RM4.2 million, PublicInvest added.
The research firm emphasised that I-Berhad's immediate focus will be on building and strengthening its property investment portfolio, which is expected to positively influence its property development pipeline.
I-Berhad has allocated RM100 million for this purpose, to be funded via a redeemable preference share issue (3.0 per cent dividend rate) fully subscribed by its major shareholder, Tan Sri Lim Kim Hong.
"This signifies a strong vote of confidence in the group's long-term prospects and is positive for minorities considering the non-dilutive nature of the exercise and lower cost vis-à-vis bank borrowings.
"Against the backdrop of recent hype on date centres and the property sector, it should be noted that the group has a seven-acre plot of land identified for the construction of such, though not a priority at this juncture," the research firm said.