Results

3Q13 core PAT rose 61.4% yoy to RM68.4m, with YTD net profit of RM182.9m making up 104% and 117% of HLIB and consensus estimates respectively.

Deviations

We believe the deviation was due to strong takeup for completed apartment units at KSL City in Johor Bahru as well as stronger than expected performance of the mall and hotel segments, as well as progress billings from Bandar Bestari @ Klang; we have no guidance from management in this respect.

Dividends

None, in line with our expectations.

Highlights

Yoy: 3Q PAT rose 61.4% yoy, mainly driven by the higher take up rate and earnings contribution from its flagship projects, mainly KSL City in Johor Bahru and Bandar Bestari @ Klang, as well as earnings contribution from its hotel operations in KSL City. Revenue generated from the mall operation also formed a major part of the increase.

Qoq: 3Q PAT was stable qoq (+2.6%), as all three major segments (property development, property investment and hotel) were relatively unchanged qoq.

No dividends declared… Management continues to limit payout to shareholders, we believe in an effort to preserve funds for: (1) working capital needs for its flagship RM2bn development in Klang; and (2) potential land acquisitions, as its relatively clean balance sheet (only 0.12x net gearing) offers it close to RM680m of gearing headroom before net gearing hits 0.5x. Therefore, we maintain our forecasts of zero dividends going forward.

Risks

Execution and demand risk of Bandar Bestari, as the group's future earnings will be highly reliant on this flagship project; an overall downturn in the property sector.

Forecasts

FY13-15E forecast raised by 45-48% to factor in: (1) Stronger earnings flow through from KSL City and Bandar Bestari; and (2) Stronger recurring income from mall and hotel operations.

Rating

HOLD

Positives: (1) Good proxy to IDR growth story; (2) new expansion to Klang Valley; and (3) growth in recurring investment income.

Negatives: Lack of liquidity; project concentration risk.

Valuation

Given the prevailing macro and sector headwinds, we maintain discount to RNAV at 40% and keep our TP at RM2.04. HOLD

Source: Hong Leong Investment Bank Research - 28 Nov 2013