Fiamma Holdings Bhd's (Fiamma) financial year end (FYE) was changed from 30 Sep to 31 Dec. As a result, we compare it with 3QCY23 (similar period last year ending Dec 31). The Group's 3QFY24 net profit was 61.4% lower YoY due to the absence of fair value gains from other investments and losses from the property development segment, as projects were still in their initial stages of development. However, after excluding non-recurring items, the core net profit for the quarter declined by 29.4% YoY. After adjusting for non-operating items, cumulative 9MFY24 results were within expectation, accounting for 79.4% of our full year estimates. We make no changes to our estimates and maintain our Neutral call and unchanged sum-of-parts (SOP) based TP of RM1.02.

• 3QFY24 revenue declined marginally by 3.6% YoY to RM98.6m, primarily due to reduced contribution from property development segment. Revenue from the property development dropped by 39.9% YoY, attributed to lower sales of completed properties and minimal revenue recognition for certain projects, as they were still in their initial stages. This decline was partly offset by a 10.5% YoY increase in revenue from the trading and service segment, which rose to RM80.4m, driven by promotional activities.
• 3QFY24 core net profit decreased by 29.4% YoY to RM4.7m, mainly due to lower revenue, losses in the property development and investment segment, and the absence of disposal gain from other investment. In addition, the trading and services segment's profit before tax (PBT) decline by 18.3% YoY to RM7.7m despite higher revenue. The blended core net profit margin for the quarter fell to 4.7%, compared to 6.5% in the same quarter last year.
• Outlook. Although the near-term earnings outlook appears challenging, the Group's long-term prospects remain positive. This optimism is supported by the growing middle class and rising household income, which should lead to stronger consumer spending. Additionally, the planned residential development in Jalan Yap Kwan Seng, KL and Johor Bahru are expected to provide further earnings upside to the Group.

Source: PublicInvest Research - 22 Nov 2024