KUALA LUMPUR (Feb 26): A sharp rise in interest expenses pulled down IOI Properties Group Bhd’s (KL:IOIPG) net profit for the second quarter ended Dec 31, 2024 (2QFY2025) to RM94.78 million, a 22% fall from RM121.50 million a year ago, despite higher revenue.

Quarterly revenue, however, grew 20% year-on-year (y-o-y) to RM729 million from RM606.90 million in 2QFY2024, driven by higher revenue contribution from its property investment and hospitality and leisure segments.

Earnings per share came in lower at 1.72 sen in 2QFY2025, compared to 2.21 sen in 2QFY2024, the property developer said in its bourse filing.

The property developer’s interest expenses shot up to RM110.9 million in 2QFY2025, a significant jump from RM181,000 a year ago, due to the commencement of operations of IOI Central Boulevard Towers (ICBT) in Singapore.

“As ICBT is still in its early stages of operation, it will take time to reach its full potential. Performance is expected to improve progressively as occupancy rates rise,” said IOI Properties.

IOI Properties did not declare any dividend for the quarter under review.

The group’s total borrowings increased to RM19.57 billion as at end-Dec 31, 2024, up from RM19.17 billion as at June 30, 2024. Meanwhile, its cash and cash equivalents totalled RM2.07 billion.

Higher expenses — ranging from marketing, administrative and other operating expenses — also weighed on its quarterly earnings, according to the filing.

Marketing and selling expenses soared 70% to RM33.75 million in 2QFY2025 from RM19.87 million previously, while other operating expenses swelled 72% to RM73.78 million from RM42.98 million a year ago.

For the first six months of FY2025 (6MFY2025), the group’s net profit fell 45% to RM163.95 million from RM295.94 million in the previous year’s corresponding period, although accumulative revenue grew 13% y-o-y to RM1.42 billion.

It attributed the earnings contraction to higher interest expenses that arose from ICBT.

IOI Properties said sales from its property development segment stood at RM692.9 million for the six-month period, 90% of which was contributed by local projects.

“In Malaysia, sales were primarily driven by the Klang Valley region at RM418.8 million, led by matured integrated developments, namely IOI Resort City in Putrajaya and Bandar Puteri Puchong in Selangor.

The Johor region registered RM196.8 million in 6MFY2025 sales, contributed by its townships, namely Bandar Putra Kulai and Taman Kempas Utama.

Looking ahead, its group chief executive officer Lee Yeow Seng said the declining interest rates outlook bodes well for the group.

“Our diversified product offerings across three countries, sizeable recurring income stream from our established property investment portfolio, and the positive outlook of the hospitality and leisure segment will provide the group with a strong foundation to ensure sustained earnings ahead,” Lee added.

“On the local front, we will continue to monitor the market and review the timelines of our launches to strike a balance for positive take-up rates while maintaining sustained earnings.

“Additionally, we are seeing growing demand for IOI Industrial Park Iskandar Malaysia following the signing of the Johor-Singapore Special Economic Zone.

“Other than that, the group has received multiple interest in industrial park in Klang Valley, specifically for IOI Industrial Park Banting. We will continue to evaluate and capitalise on emerging opportunities by strategically aligning our offerings with evolving market demands,” he further added.

Over in China, economic challenges continue to persist despite efforts by the central bank to revitalise the property sector, IOI Properties said.

The group remains focused on clearing completed inventories at IOI Palm City and IOI Palm International Parkhouse in Xiamen, allowing swift monetisation into cash flow to support its capital requirements.

“Meanwhile, the 370-room Sheraton Grand Xiamen hotel, which completed its construction in November 2024, is set to open its doors in March 2025. This addition is expected to complement IOI Mall Xiamen and IOI Business Park Xiamen, strengthening the group’s recurring income stream,” it added.

Over in Singapore, the group said its proactive efforts and improving market sentiment in the office segment have driven ICBT’s commitment rate to 75%, a significant increase from approximately 39% a year ago.

“The strong leasing momentum was further supported by the final Temporary Occupation Permit obtained in December 2024. Moving forward, we remain focused on achieving a stronger growth for this sub-segment while preparing for the development of W Residences Singapore - Marina View,” it said.

IOI Properties’ share price was unchanged at RM1.99 on Wednesday, giving the group a market capitalisation of RM10.96 billion. Over the past one-year, the stock has dropped 14%.