Results

• Within expectations but below consensus: 3QFY17 core net profit came in at RM17.5m, bringing 9M17 core net profit to RM44.0m, accounting for 80% of ours but 55% of consensus forecast.

Deviations

• None.

Dividend

• None.

Highlights

• YoY: Core net profit plunged 20.5% to RM17.5m in 3Q17 mainly due to (i) weaker logistics earnings driven by higher deprecation cost caused by addition of warehouses and asset revaluation and (ii) weaker property development contribution due to completion of major property development projects.
• QoQ: 3Q17 core net profit surged by 34.4% driven by (i) stronger seasonal contribution from logistics division with higher profitability and (ii) stronger QoQ property development PBT margin due to downward reversal of construction cost on executed projects.
• Ytd: 9M17 core net profit came in at RM44.0m, 2.3% higher YoY underpinned by flattish property EBIT driven predominantly by cost reversal of major property development projects. This is being partially offset by weaker logistics contribution driven by higher depreciation costs.
• Comment: Logistics and warehousing division will continue to anchor the group’s growth in the coming years, leveraging on the expected increase in e-commerce and B2B trade volume.
• Meanwhile, property development segment is expected to account for smaller portion of the group’s total revenue post completion of major development projects.

Risks

• Contract cancellation from major customers;
• Surge in fuel prices;
• Decline in domestic trade volume,

Forecasts

• Forecasts and assumptions are maintained.

Rating

BUY ↔

• We believe that company’s plan to unlock value of its warehousing assets through REIT-listing remains intact albeit timing is still uncertain at this juncture. It still possesses ample landbank (152.6 acres) for future property development.

Valuation

• Maintain BUY on the stock with unchanged SoP-driven TP of RM2.06 (+24.8% upside). Our TP excludes potential value from undeveloped landbank.

Source: Hong Leong Investment Bank Research - 21 Feb 2017