Highlights

• FY17 results surpassed expectations… as core profit grew 60.6% yoy mainly driven by growth in property development, boosted by earlier-than-expected contribution from Trilinq in Singapore.
• Flattish sales target for FY18… Management is guiding for a flattish sales target of RM2.8bn after having outperformed FY17 initial target of RM2.3bn despite a soft domestic market thanks to the contribution from Trilinq project. The sales will be supported by RM3.0bn worth of new domestic and international launches.
• The current low unbilled sales… is not expected to affect the sustainability of FY18 earnings considering the recognition of the remaining 155 Trilinq units. Besides, more than RM2.0bn worth of inventory is set to be monetised following the recovery of interests among prospective buyers. Notably, new sales in China are also expected to come in timely towards the end of FY18.
• International contribution from China… will increase given the pipeline launches in Xiamen 2 and Xiamen 3 to sustain the earnings from international segment as Trilinq project has been completed. RMB2bn worth of GDV from the remaining GDV of RMB4.6bn in Xiamen 2 is expected to launch in FY18. This will be followed by RMB2.6bn worth of GDV in Xiamen 3 in the following years.
• Stable contribution domestically…is expected with more projects will to be rolled out in its growing township in Bandar Puchong (Cruise Residences, GDV: RM300m), Bandar Puteri Bangi (The Strata Townhuse, GDV: RM150m), Bandar Puteri Kota Warisan (Ayden Townhouse & Service Apartment, GDV: RM420m), Sierra 10 (Service Apartments, GDV: RM110m) and others.
• Update on Central Boulevard… Understand that the Central Boulevard project in Singapore (partnering Hong Kong Land (33%)) is currently pending relevant approvals from both Malaysian and Singaporean authorities. However, Management is looking to commence construction by end of CY17 given that the target of completion is by end CY21.

Forecasts

• Unchanged.

Rating

BUY ↔ , TP: RM2.54 ↔

• We see value emerging given the attractive book value at 0.5x (industry average of 1.0x) on the back of consistency in earnings growth, reinforced by the improved take-up rates for its projects and strong track record.

Valuation

• TP is maintained at RM2.54 based on unchanged 35% discount to RNAV of RM3.91.

Source: Hong Leong Investment Bank Research - 20 Oct 2017