-  We maintain our HOLD recommendation on Crescendo Corp with an unchanged fair value of RM3.50/share. This pegs the stock at a 45% discount to our NAV estimate of RM6.36/share.

-  Crescendo reported 1QFY14 net profit of RM18mil against a turnover of RM71mil. No dividends were declared during the quarter under review.

-  While its 1Q results only constituted 21% of our full-year estimates (consensus: 24%), we consider this to be inline due to expectations of stronger results in the coming quarters.

-  Dissecting its results, topline fell 17% largely on the completion of certain external construction contracts during the quarter.

-  However, pre-tax profits surged 27% YoY, aided by strong property billings – which rose 124% YoY. This is backed by unbilled property sales of RM133mil as at 30 April 2013.

-  We estimate that the group achieved new sales of ~RM60mil for 1QFY14 or close to 60% for the whole of FY11.

-  More importantly, we expect Crescendo to post a stronger 2H following a return of buying interest post the 13^th general election.

-  Notably, Crescendo sold 4 out of the 28 completed industrial units worth RM220mil at Nusa Cemerlang Industrial Park (NCIP) at an average price of RM350psf within a week from the conclusion of the GE.

-  But the real challenge for Crescendo is to strike a delicate balance between pursuing an aggressive presales strategy to ensure earnings deliverance, versus embracing a strict pricing policy in anticipation of future appreciation in capital values.

-  This may put some pressure on its pre-sales momentum in the near-term, we believe. Our pre-sales forecast for FY14F stands at RM500mil against ~RM60mil achieved in 1QFY14.

-  The stock’s share price has shed 23% since we downgraded it to a HOLD on 18 May 2013 from a peak of RM3.63/share.

-  We would only review our call if there are visible signs of a strong improvement in the group’s sequential pre-sales pipeline.

Source: AmeSecurities