KUALA LUMPUR: IOI Properties Group Bhd is keeping its FY22 sales projection to RM2.3bil, the same level as that of the current year, as market confidence remains low, says RHB Research.

       "Although the Malaysian Government has announced the reopening of the economy in phases since early September, market confidence is still vulnerable to any potential sporadic spike in new COVID19 cases and new virus variants," it said in note.

       Following a meeting with IOI Properties' management, RHB said the property group plans to launch only about RM1bil worth of new projects in Malaysia in FY22, comprising mainly landed products as the company still has unsold high-rise properties available for sale.

       RHB said IOI Properties' sales are expected to be soft for the recent July-September quarter as compared to RM742mil recorded in the previous quarter.

       It said earnings are expected to only pick up from the second half of next year as footfall in shopping malls improve and constructions works accelerate in Malaysia.

       However, footfall in IOI City Mall Putrajaya has rebounded rapidly to nearly pre-pandemic levels since the the safety measures were lifted in September.

       "While some smaller tenants terminated their leases, the overall occupancy rate is still hovering around 95%. Its hotel operations are still affected, with an occupancy rate of only 20-30%," it said.

       Meanwhile, RHB said IOI Properties' Xiamen project may be impacted in the short term as China Evergrande's debt crisis will likely dampen buyer sentiment and lower demand for real estate.

       It noted that the opening of IOI Palm City Mall in Xiamen has been deferred by a month to end-October due to the increase in new Covid-19 cases in Fujian and the reimposition of some movement restrictions.

       "Still, we remain upbeat on IOIPG’s overseas markets where COVID-19 is better contained, so demand should see a more sustainable recovery," said RHB.

       Over the longer-term, IOI Properties targets to launch the Marina View project in two years, pending approvals from the authorities.

       "Net gearing is expected to rise to around 0.70x from 0.47x presently. The group’s land-holding cost may be reduced, if the project can be rolled out earlier," said RHB.

       The research house maintained its "buy" call on the stock with a target price of RM1.53.