IOI Properties expects to continue drawing buyers despite slower 3Q sales

KUALA LUMPUR (May 29): IOI Properties Group Bhd said its third quarter net profit fell after its property development activities were affected by the lockdown in Malaysia and China.

The group is however confident that its projects in strategic locations around Malaysia will continue to draw buyers as the economy gradually improves after the Conditional Movement Control Order.

“In China, economic activities have resumed and [were] in recovery mode after the lockdown due to the spread of the Covid-19 pandemic.

“The group’s recent launch of high-rise condominiums in IOI Palm City, Xiamen, received a favourable response with a take-up rate of 80% with profit to be registered in the coming quarters,” IOI Properties said in a statement.

The group’s net profit for the quarter ended March 31, 2020 dropped 63.35% to RM71.36 million, from RM194.7 million a year earlier.

Quarterly revenue declined 17.7% to RM401.43 million from RM487.74 million, according to the group’s exchange filing.

In particular, the property development segment saw its revenue drop 19% to RM284.1 million and operating profit fall 29% to RM85.5 million, due to lower revenue contributions from both the Malaysian and Chinese operations as a result of the Covid-19 pandemic.

IOI Properties explained that sales and construction activities were not regarded as essential businesses during the lockdown, and government offices were not allowed to operate during such periods.

The property investment segment, meanwhile, saw revenue decline 9% to RM80.9 million and operating profit fall 22% to RM40.1 million, on the back of lower rental income derived from the retail segment as a result of the closure of non-essential businesses and services during the movement control order.

The hospitality and leisure segment also saw a fall in revenue by 25% to RM35.4 million from RM46.9 million last year due to a drop in occupancy rate. As a result, the segment reported an operating loss of RM5 million, against an operating profit of RM3.8 million last year

IOI Properties said that for the nine months ended March 31, 2020, net profit came in 21.82% lower at RM407.74 million, from RM521.52 million a year prior. Nine-month revenue fell 11.41% to RM1.51 billion from RM1.7 billion.

On its prospects, the group said it will leverage its digital marketing capabilities, accelerate sales via online platforms and adopt aggressive sales and marketing strategies with a focus on mid-price range of properties in Malaysia.

“The pandemic outbreak is expected to affect the performance of the retail and hospitality segments. An active pragmatic tenant retention strategy has been adopted to respond to the difficult market conditions for the retail malls to ensure occupancies are optimised.

“As for the hospitality segment, our marketing teams continue to be actively mobilised to market their services in anticipation of a less restricted movement environment,” the group said.

Overall, IOI Properties said it anticipates the operating environment to continue to be challenging.

“Nonetheless, the group remains optimistic on its longer-term prospects of its projects due to the strategic locations of our properties which are supported by good infrastructure networks and amenities,” it said.

IOI Properties shares closed 3.85% or four sen higher at RM1.08, valuing it at some RM5.95 billion.