Tiong Nam’s 1HFY19 core earnings came in at RM9m (-59.5% YoY), making up 26.7% of HLIB’s forecast and 22.4% of consensus. Core earnings plunged QoQ and YoY mainly due to the decrease in contributions from property development segment as most of the projects have reached completion stage. We cease coverage on Tiong Nam as we do not foresee any catalyst on this counter in the near-term due to subdued profitability and the delay in REIT listing amidst the unfavourable market condition. Our previous HOLD recommendation, TP: RM1.04 was based on SOP.

Below expectations. 1HFY19 core earnings came in at RM9.0m, making up 26.7% of HLIB’s forecast and 22.4% of consensus. The weaker-than-expected result was largely due to decreased contributions from property development segment.

Dividend. None Declared.

QoQ/YoY. Core earnings plunged 89.2% QoQ and 94.5% YoY to RM0.9m mainly due to the decrease in contributions from property development segment as most projects have reached completion stage, which was partially offset by the improvement from logistics and warehousing segment.

YTD. Core earnings decreased 59.5% to RM9m (from RM22.1m) mainly due to the increase in finance cost and decrease in contributions from property development segment as most projects have reached completion stage. These were partially offset by the improvement from logistics segment.

Outlook. We expect the profitability of Tiong Nam’s core business (logistics and warehousing segment) to remain subdued moving forward. In the past, the property development segment uplifted the weakening profitability of Tiong Nam’s core business. However, management has guided they will not be placing emphasis towards new property development projects in the near term amidst the soft property market condition.

Cease Coverage. We cease coverage on Tiong Nam as we do not foresee any catalyst on this counter in the near-term due to subdued profitability and the delay in REIT listing amidst the unfavourable market conditions. Our previous forecast, HOLD recommendation and SOP derived TP of RM1.04 should no longer be used as a reference going forward.

Source: Hong Leong Investment Bank Research - 27 Nov 2018