1H19 revenue of RM2.2bn translated into a core PATMI of RM152.6m (-4.9% YoY), was within HLIB and consensus estimates accounting for 43.5% and 42.4% of full year forecasts, respectively. We deem this to be in line as 2H is seasonally stronger than 1H. New sales of RM1.26bn was achieved in 2Q19, bringing 1H19 sales to RM1,977m while GDV launches came in at RM1.2bn, bringing 1H19 launches to RM1.55bn. Forward earnings visibility continues to be supported by the total unbilled sales of RM11bn, representing a strong cover ratio of 3.2x. We keep our forecasts unchanged and BUY call with an unchanged TP of RM2.65 based on a discount of 55% to RNAV of RM5.88.

Within expectations. 2Q19 recorded core PATMI of RM67.6m (-20.4% QoQ, -31.7% YoY), bringing 1H19 core PATMI to RM152.6m (-4.9% YoY), which was within HLIB and consensus estimates accounting for 43.5% and 42.4% of full year forecasts, respectively. Exceptional items removed were in relation to land sale and forex gain totalling RM39m. We deem this to be in line as 2H is seasonally stronger than 1H. No dividends were declared.

QoQ/YoY. 2Q19 revenue increased 54.4%/44.3% to RM1,335.7m largely due to the recognition of land sale (RM449.2m). After removing the land sale and forex gain, Core PATAMI fell 20.4%/31.7% to RM67.6m mainly due to a lower margin product mix coupled.

YTD. Revenue increased 39.2% to RM2,200.6m from (RM1,581.5m) on the back of the aforementioned land sale coupled with higher progressive billings. However, core PATMI decreased 4.9% to RM152.6m (from RM160.4m) mainly due to a higher effective tax rate, despite the higher progressive billings.

GDV launches. RM1.2bn worth of GDV launches were recorded for 2Q19, bringing 1H19 launches to RM1.55bn, with the Central region constituting bulk of the launches (RM1.34bn). Amidst the soft market demand, management has chosen to lower its target to RM4.88bn (from RM6.8bn). Note that most of the planned launches focused in landed projects within matured townships.

New sales of RM1.26bn was achieved in 2Q19, bringing 1H19 sales to RM1,977m (13% from international). Sales from the domestic market constitutes of: (i) Central Region: RM1,191m; Northern & Southern Region: RM523m; (iii) International Region: RM263m. With regards to the FY19 launch target, management has also chosen to lower its sales target to RM4.55bn (from RM5.65bn). Nonetheless, forward earnings visibility continues to be supported by the total unbilled sales of RM10.7bn, representing a strong cover ratio of 3.2x.

Forecast. Unchanged.

Maintain BUY rating with an unchanged TP of RM2.65 with a 55% discount to RNAV of RM5.88. Earnings trajectory is expected to improve moving forward along with better progression for newer projects. At current valuations (70% discount to RNAV and 0.6x PB), it is attractive for investors to collect on the backdrop of better earnings trajectory and growth expectations in FY20.

Source: Hong Leong Investment Bank Research - 15 Aug 2019