Results

• Above Expectation: 2QFY15 PATAMI double QoQ with 1HFY15 PATAMI accounting for 57% and 55% of HLIB’s and consensus’ estimates, respectively.

Dividends

• Declared interim dividend of 4 sen per share versus our full year forecast of 9.7 sen.

Highlights

• 2QFY15 revenue grew by 71% YoY mainly driven by 66% jump in property development as a result of handover of first residential tower in Fulton Lane. PBT double YoY as PBT margin has increased from 18% to 21%. Fulton Lane has unbilled sales of RM1bn and expected to handover the second residential tower in 2H15.

• SPSB achieved RM774m sales (domestic: RM627m, international: RM147m) in 2QFY15 (1QFY15: RM1,019m). YTD, the group’s sales totalled RM2bn (up to 31 May 2015), fell short of company full year target of RM4.6bn. As a result, SPSB has revised down sales target for FY15 from RM4.6bn to RM4.0bn, in view of the challenging outlook.

• Central region sales in Malaysia registered RM500m in 2QFY15 which were driven by take up in Setia Alam, Setia Ecohill and KL EcoCity. However, its international sales were weak with take up rate for BatterSea Phase 3A remain flat at 50%. This was mainly due to the uncertainty prior to the general election in UK. We expect sales to pick up post general election in May 15.

• Unbilled sales currently stood at RM11bn, represents 3x FY14’s property development revenue. We believe this will provide earnings visibility in the face of potential negative headwinds post implementation of GST in April 2015.

Risks

• Slowdown in sales;
• Escalation in construction and raw material costs; and
• Delays in launches.

Forecasts

• Despite lower sales target, we updated our financial model to reflect the better than expected progress billing. Hence, our FY15 and FY16 earnings forecasts raised by 11% and 6% respectively.

Rating

HOLD

Positives

• Strong product concepts and pipeline; consistent dividends.

Negatives

• No longer the most liquid property stock in Malaysia.

Valuation

• Our TP is adjusted from RM3.45 (pegging at unchanged 30% discount to RNAV) to RM3.41 post adjustment on RNAV as we refine the assumption post annual report.

Maintain HOLD.

Source: Hong Leong Investment Bank Research - 16 Jun 2015