Hospitality sector revival to benefit IOIProp

PETALING JAYA: IOI Properties Group Bhd (IOIProp) is expected to enjoy a sharp turnaround in the hospitality segment on the back of anticipated higher sales from its hotel room inventory expansion by 64% this year and higher room rates following room refurbishment work.

According to Hong Leong Investment Bank (HLIB) Research, the hospitality sector has seen a robust post-pandemic surge, with hotels especially in tourist hotspots and city centres experiencing record high room and occupancy rates that surpassed pre-pandemic levels.

“IOIProp is anticipated to benefit and ride on this boom, as its hotel room inventory will expand significantly by 64% in 2024 from 1,876 to 3,075 rooms; the upcoming completion of refurbishments for its Palm Garden and Putrajaya Marriott hotels should see higher room rates,” the research house said.

In addition, IOIProp saw a surge in room rates in its 49.9%-owned JW Marriott Singapore from “Swiftonomics” and other major concerts.

“We expect a sharp turnaround in the segment from a loss before interest and tax of RM5.1mil recorded in the first half ended Dec 31, 2023,” it said.

HLIB Research anticipates that the combined value of IOIProp’s property investment and hospitality assets are estimated to swell to above RM30bil with the completion of IOI Central Boulevard (IOICB).

It is also one of the largest developers in Malaysia with 8,200 acres of remaining land, comprising 5,200 acres of core land with RM63bil remaining in gross development value (GDV) and 3,000 acres of non-core land.

“If its venture in Singapore proves to be a success, it will be a launch pad that will propel the group to the next stage of growth, allowing it to become one of the largest real estate companies in the region,” the research house added.

It raised its financial year 2026 (FY26) forecast by 10.2% to account for higher contribution from Marina View Residences (MVR).

“Our FY26 number is now at RM1.08bil, representing a strong 19.2% compound annual growth rate or CAGR from FY23-FY26. Our FY26 earnings forecast is currently the highest among consensus indicating our conviction on the group’s earnings delivery,” it said.

HLIB Research has maintained a “buy” call on the counter with a higher target price of RM3.30 from RM2.95 based on a lower 45% discount from 50% to its estimated revised net asset value of RM6 as it imputes higher GDV from MVR.

“Our narrower discount is premised on the impending unlocking of a significant portion of its asset value via IOICB and MVR.

“The stock is currently trading at an undemanding 0.54 times of its book value.

“If we take into account the potential revaluation gain which is accretive to its book value, its price-to-book ratio would further reduce to close to 0.4 times, making it an even more compelling investment case,” HLIB Research said.