Results

• Above Expectation: 4QFY16 PATAMI surged by 217% bringing full year of FY16 to RM808m, accounting for 123% and 120% of HLIB’s and consensus estimate.

Dividends

• Declared dividend of 15sen/share, bringing full year dividend to 20sen/share, representing yield of 5.9%.

Deviation

• The stronger result was mainly due to faster than expected delivery of Phase 1 units in Battersea Power Station (two blocks had been delivered versus our assumption of one block).

Highlights

• YoY: There are no comparative figures for the YoY due to change of financial year end from Oct to Dec.
• QoQ: Revenue increased by 40% mainly due to handover of Parque Melbourne for AUD231m or RM711m in Nov16. PATAMI surged even further by 217% due to contribution from Phase 1of Battersea Power Station.
• New sales increased by 89% QoQ to RM1.8bn (versus RM942m in 3QFY16), mainly driven by local sales from central and eastern region comprise of KL Eco City, Setia Alam, Aeropod and Setia Eco Glades.
• For the full year FY16, sales achieved RM3.8bn, exceeding company full year sales target of RM3.5bn. Going into FY17, company sets a sales target of RM4bn (+5% YoY) comprise of 77% from local sales and 23% from international sales. This is on the back of RM5.4bn worth of target GDV launches.
• On international side, the company plans to launch Exhibition Street (GDV: RM1.6bn) and Prahan (RM120m) in Melbourn. Take up rate for Battersea Phase 3A remained slow at 60%.
• In the long run, we understand that the company intends to build a portfolio of high yield investment properties to provide recurring income.

Forecasts

• We raise our FY17 earnings forecasts by 8% but reduce FY18 earnings projection by 12% mainly due to our adjustment in the timing handover of Battersea Power Station project.

Rating

HOLD ↔

• It is currently trading at close to average P/RNAV band with consistent dividend yield of 4%. Potential upside would emanate from further landbanking activities and potential M&A opportunities.

Valuation

• We raise our RNAV by 6% after factoring in the recent land acquisition on Seberang Prai, Penang (GDVL 9.6bn over 15-20 years).
• Maintain HOLD with TP increased from RM3.11 to RM3.29 based on unchanged 35% discount to RNAV of RM5.07.

Source: Hong Leong Investment Bank Research - 24 Feb 2017