Results

• Above Expectations: 14M15 PATAMI achieved RM918m, accounting for 119% and of HLIB’s estimates.

Deviation

• Mainly due to stronger than expected progress recognition from property development and higher revenue recognition arising from change in accounting policy (now recognised the remaining 10% of sales at the point of receipt of CCC rather than at a later stage when the defect liability period expired).

Dividends

• Declared dividend of 19 sen per share, bringing full year dividend to 23 sen share, translating to 8% of dividend yield in 14MFY15.

Highlights

• 2M Oct – Dec 15 profit reached RM208m, doubling from 4Q15, mainly driven by stronger revenue recognition from Setia Alam project and higher revenue recognition arising from change in accounting policy. To note, the company has changed its financial year end from Oct to Dec.

• New sales of RM872m achieved (domestic: RM698m, international: RM174m) in 2M Oct – Dec 15 (4QFY15: RM911m), exceeded company sales target of RM4bn. The stronger than expected sales was driven by new phases in Setia Alam and Setia EcoHill. SPSetia maintained its sales target of RM4bn in FY16.

• Take up rate for Battersea Phase 3A remained slow, merely increased from 57% to 59% with 5 units in the 2M Oct – Dec 15 period.

• Unbilled sales decreased slightly from RM9.5bn to RM9.2bn, representing 2.6x FY14’s property development revenue. We believe this will provide earnings visibility in the near term.

Risks

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

Forecasts

• FY16 and FY17 earnings were adjusted by 1% after we factored in stronger billing recognition in FY15.

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 from RM3.47 to RM3.12 after raising the discount to RNAV from 30% to 35% in view of the challenging property outlook amidst subdued consumer sentiment and tight loan environment.

Source: Hong Leong Investment Bank Research - 26 Feb 2016