Results

• Inline: 1QFY16 PATAMI was flat YoY, accounting for 23% of ours and consensus’ estimates , respectively.

Dividends

• None.

Highlights

• 1QFY16 revenue surged by 15% YoY mainly contributed by projects in Puchong Lakeside Residences, Saujana Rawang, Glomac Centro and Reflection Residences. However, PATAMI was flat YoY mainly due to normalise profit margin as there was cost savings in previous corresponding period. Take up rates for on-going projects remain healthy at above 80%.

• 1QFY16 sales achieved only RM30m (vs. RM420m in 4QFY15), accounting for only 5% of company’s full year sales target of RM600m. This is mainly due to absence of launches in 1QFY16 with mainly spillover sales from new launches in previous quarter.

• We expect stronger 2HFY16 as the company plans to launch RM802m (vs. RM577m in FY15) of projects which mainly comprise of townships and landed residential products with price range from RM500-600k/unit. Key launches in 2HFY16 include Phase 7 of Lakeside Residences, Saujana KLIA and Saujana Jaya in Johor. Given the strong take up rate for Saujana KLIA (circa 94%), the company will launch new phases of double storey terrace houses (circa RM500k+) with GDV of RM275m in 2HFY16.

• Unbilled sales decreased slightly from RM796m to RM737m QoQ, representing 1.6x of the group’s FY15 property development segment revenue.

• Balance sheet remains solid with net gearing at circa 0.35x which provides room for potential land banking exercise.

• The property outlook in near term remains uncertain given the weak sentiment post GST coupled with tightening loan approval from bank. We also understand that loan rejection rate for some peer’s projects has surged to as high as 50%.

Risks

• Slowdown in sales
• Weaker margins.

Forecasts

• Unchanged.

Rating

HOLD

• Positives: Strong land-banking, branding and execution track record.

Negatives

• Lack of liquidity / free float

Valuation

• Maintain HOLD with unchanged TP of RM0.86 based on unchanged 50% discount to RNAV with dividend yield of 5.2%.

Source: Hong Leong Investment Bank Research - 18 Sep 2015