HLBank Research Highlights

KSL Holdings - Weak 4Q to end the year; ceasing coverage

HLInvest
Publish date: Thu, 27 Feb 2014, 09:29 AM
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This blog publishes research reports from Hong Leong Investment Bank

Results

Net profit swung from RM68.4m net profit in 3Q13 to an RM10.5m loss in 4Q13 due to fair value adjustment and provision. For FY13, full year net profit of RM172.4m made up 98% and 110% of HLIB and consensus estimates respectively.

Deviations

Largely in line.

Dividends

None, in line with our expectations.

Highlights

Yoy results: 4Q revenue growth was flattish (-4.4% yoy) but net profit swung from RM39.0m in 4Q12 to RM10.5m net loss in 4Q13. KSL attributes this deterioration in earnings to: (1) The loss arising from fair value adjustment of RM9.4m on investment properties; and (2) Provision of deferred taxation for RPGT of approximately RM13m.

Qoq revenue: Sharp sequential decline in revenue (-44% qoq), as 3Q revenue was exceptionally strong at RM217m, which KSL attributed to: (1) higher take up rate and percentages of completion of existing on-going and completed mixed development projects, especially in Johor Bahru and Klang; and (2) Revenue generated from hotel and mall operations.

Qoq net profit: The swing in the bottomline was even greater, from RM68.4m net profit in 3Q13 to RM10.5m net loss in 4Q13. Other than the sequential decline in 4Q13 topline, 4Q13 losses were exacerbated by one-off mentioned above.

Ceasing coverage. Access to management has been particularly difficult over the past couple of years, making it difficult for us to make meaningful earnings forecasts for KSL or to formulate a fundamental outlook. Therefore, following this final report, we cease coverage of KSL.

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

Rolling over our numbers, our FY14-15 forecasts are marginally raised by 0.7%.

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 - 27 Feb 2014

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Tey Tian Foo

Still don't understand such drastic drop in sales and big swing to losses. While many other property developer has have very good results. Anybody can enlighten me?

2014-02-27 12:23

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