Results

• Slightly below expectation: 2QFY16 PATAMI dropped 17% QoQ, bringing 1HFY16 PATAMI to RM39m, accounting for 43% of ours and consensus’ estimates , respectively.

Dividends

• Mainly due to higher effective tax rate arising from nonrecognition of deferred tax assets on tax losses.

Highlights

• 2QFY16 revenue grew 19% QoQ mainly due to progress of revenue recognition from existing projects and maiden contribution from Saujana KLIA. Take up rates for ongoing projects are encouraging at above 90%.

• Given the absence of launches in 1HFY16, new sales in 2QFY16 only achieved RM50m (vs. RM30m in 1QFY16), bringing 1HFY16 sales to RM80m. Major launches will be in 2HFY16 with projects worth RM778m. However, given the challenging outlook due to tightening loan approval from bank, company has revised down its sales target from RM600m to RM500m (flat YoY).

• 2HFY16 launches mainly comprise of townships and landed residential products with price range from RM500-600k/unit (excluding Phase 7 of Lakeside Residence – RM870k/unit and Centro V Damansara). Other key launches include Saujana KLIA, Kulaijaya, Saujana Aman, Saujana Utama and Sri Saujana, Johor.

• Saujana KLIA with affordable pricing below RM500k received overwhelming response with fi rst 3 phases of double storey houses fully sold and 95% take up rate achieved for shop office. In 2HFY16, the company will launch new phases of double storey terrace houses with GDV of RM275m.

• Unbilled sales decreased slightly from RM737m to RM676m QoQ, representing 1.5x of the group’s FY15 property development segment revenue.

• The property outlook in near term remains uncertain given the weak sentiment post GST coupled with tightening loan approval from bank.

Risks

• Slowdown in sales
• Weaker margins.

Forecasts

• FY16 and FY17 earnings were cut by 5% and 4% respectively mainly due to sales target revised down from RM600m to RM500m in FY16.

Rating

HOLD

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

Negatives

• Lack of liquidity / free float

Valuation

• Maintain HOLD with unchanged TP of RM0.89 based on unchanged 50% discount to RNAV with dividend yield of 5%.

Source: Hong Leong Investment Bank Research - 3 Dec 2015