Results

• Within Expectations: 1QFY18 core PATAMI came in at RM195.5m, accounting for 20.3% and 21.1% of ours and consensus full year estimates, respectively. The results are deemed in line as 1Q usually makes up about 20% of full year numbers.

Deviations

• None.

Dividends

• Nil.

Highlights

• QoQ: Revenue decreased 27.2% due to the completion of Trilinq project in Singapore back in 4QFY17. Core profit was down by 30.8% in tandem with lower revenue.
• YoY: 1QFY18 core profit rose by 7.9% driven by higher operating margin for all segments. The lower revenue from property development was partially offset by better performance from property investment and leisure & hospitality divisions.
• New property sales in 1QFY18 achieved RM677m, on course to achieve full year target of RM2.8bn (flat yoy). Unbilled sales declined to RM930m (from RM1bn in 4QFY17) as Trilinq project is completed, representing a cover ratio of only 0.25x.
• We understand that FY18 earnings will be sustained by the recognition of the remaining 155 units in Trilinq. Besides, more than RM2.0bn worth of inventory is set to be monetised following the recovery of interests among prospective buyers.
• On international front, Rmb2bn worth of GDV from the remaining GDV of Rmb4.6bn in Xiamen 2 is expected to be launched in FY18 and come in timely towards the end of FY18 to fill up the gap left by Trilinq.
• Domestically, focus will be in Klang Valley with more projects will 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.

Forecasts

• Unchanged.

Rating

BUY ↔, TP: RM2.54 ↔

• We see value emerging post the dilutive rights issue exercise in 1QCY17, on the back of attractive book value at 0.6x (industry average of 1.0x), reinforced by the improved take-up rates for its projects and its 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 - 21 Nov 2017