Results

• Above Expectation: 3QFY15 PATAMI surged by 153% YoY with 9MFY15 PATAMI accounting for 98% and 94% of HLIB’s and consensus’ estimates, respectively.

Dividends

• None.

Highlights

• 3QFY15 revenue grew by 81% YoY mainly driven by 82% jump in property development as a result of progress handover of second residential tower in Fulton Lane. PBT jumped 117% YoY as PBT margin has increased from 22% to 27%.

• Fulton Lane still has unbilled sales of RM382m and expected to be fully recognised in 4QFY15.

• Sales remain slow with RM744m achieved (domestic: RM573m, international: RM171m) in 3QFY15 (2QFY15: RM774m).

• 9MFY15, the group’s sales totalled RM2.54bn, only accounting for 64% of full year target of RM4bn. This is mainly due to slow sales from its BatterSea Phase 3A with take up rate hovering around 50%. Strengthening of Britain pound coupled with uncertain global macro outlook has deterred Asian buyers.

• Local sales registered RM573m in 3QFY15 which were driven mainly by take up in Setia Alam and Setia Ecohill.

• Unbilled sales currently stood at RM9.9bn, represents 2.8x FY14’s property development revenue. We believe this will provide earnings visibility in the face of 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 raised our FY15 and FY16 earnings by 20% and 14% respectively to reflect better margin from oversea property development.

Rating

HOLD

• Posi tives: Strong product concepts and pipeline; consistent dividends.

Negatives

• : No longer the most liquid property stock in Malaysia.

Valuation

• Maintain HOLD with TP adjusted slightly from RM3.41 to RM3.47 based on unchanged 30% discount to RNAV posted earnings upgraded. Despite better than expected results, earnings outlook still clouded by sector headwinds as well as stagnation in sales from UK project.

Source: Hong Leong Investment Bank Research - 11 Sep 2015