• A laggard construction cum property player. CRESBLD (listed in June 2003 via RTO of MGR Corp Bhd) started off in the general construction works business in 1985. Over the past 32 years, the group has carved a strong foothold in the local construction industry, especially in the commercial, residential and institutional building construction, and has moved along the supply chain and diversified into other construction related activities, such as property development, M&E services and project management.

• Downside risks limited. In our view, the market may have irrationally mispriced CRESBLD as the stock is only trading at 0.42x P/BV, 61% below the sector and 12% below its 10-year average, supported by an attractive DY of 4.2% (peers: 1.4%). We think such valuations have provided a sufficient margin of safety and cushion further selldown.

• Potential rerating? In its 4Q16 results review, management is cautiously optimistic of a better FY17 amid strong outstanding order book and unbilled sales, providing earnings visibility for the next two years. On the construction front, its existing order book stood at ~RM1bn (lasting until 2020-2021) with ongoing construction projects by UDA (RM106m serviced apartments in KL), Sime Darby (RM392m Quarza Mall in Setapak), Shah Alam Development Project (RM121m medium cost apartments), LATITUD8 (RM340m mixed development project in Jalan Ampang) and DBKL (RM83m carpark)

• On the property front, its existing ongoing & future GDV stood at ~RM4bn, including The Greens (RM330m medium cost apartments in Shah Alam), LATITUD8 (RM1bn GDV mixed development project in Jalan Ampang), Transit Oriented Development project (RM1bn GDV mixed development project in Kelana Jaya) as well as the re-development of the Malaysian Rubber Board land (RM1.33bn mixed-use development along Jalan Ampang). Hence, share prices are likely to witness further re-rating if CRESBLD delivers a stronger showing in FY17.

• Bullish downtrend line breakout. After tumbling 50% from all time high of RM1.67 (25 Jul 14) to a low of RM0.84 (28 Apr 16), CRESBLD’s share prices managed to consolidate above the long term uptrend line (from Feb 2013) before closing at RM0.955 yesterday. Following the bullish daily and weekly downtrend line breakout, share prices are expected to advance further in the short term to medium term, as technicals are on the mend. A decisive breakout above RM0.975 (13 Oct high) will spur prices higher towards RM1.01 (14 June high) before reaching our long term target at RM1.15 (38.2% FR).

• On the flip side, failure to hold at supports near RM0.905 (6 Mar) may indicate weakness in the share price towards RM0.88 (28 Dec). Cut-loss at RM0.87.

Source: Hong Leong Investment Bank Research - 14 Mar 2017