Period    4Q12

 FY12 net profit of RM194m was within expectations, making up 98% of the street's FY12E earnings of RM198m and 95% of our RM205m. 

Dividends   4.0 sen single-tier dividend (2.0% yield) exceeded our FY12E NDPS of 2.0 sen (payable on 3-Jul-12). 

 YoY, FY12 bottom line fell 11% because FY11 recorded gains on disposal of RM63m on the sale of AEON@Melaka. Excluding the gains on disposal, FY12 core earnings grew 23% on major billings from The Light and on-going townships. 

 QoQ, 4Q12 pretax profit jumped 20% to RM91.4m. However, the corresponding bottom line was flat (+1%) at RM56m as effective tax rates hit a high of 35% (3Q12: 27%) because of non-deductible expenses and under-accruals in prior years. 

 FY12 recorded RM1.4b (-8% YoY) non en bloc sales, which is in line with our initial target. New project launches included Vertiq@MetroEast Penang (GDV: RM230m) and The Address@Bukit Jambul, Penang (GDV: RM130m). Johor sales have also done tremendously well, making up c.15% of sales vs. its typical less than 10% of full year sales. 

Outlook   Management mentioned that the tighter mortgage assessment has impacted overall demand, although affordable housing is still highly sought after. In the medium term, the group will be driving its sales from The Light and its stable of mass housing projects (Shah Alam 2, S2@Seremban, Johor projects) and the long-awaited township, Rimbayu (a.k.a. Canal City), which is slated to have a GDV of RM11b. We understand a project preview could take place in the next two months. Management targets FY13E sales of up to RM1.5b. 

 No material changes to our FY13-14E core earnings of RM235m-RM259m based on unchanged sales targets of RM1.5b-RM1.6b. Unbilled sales of RM1.2b provides a 1 year visibility. 

Rating  MAINTAIN MARKET PERFORM

 More affordable products coming on line. Expectations of Canal City projects could propel FY14 to newer heights, but this is still some time away. Meanwhile, the company will be subjected to the sector's unexciting dynamics.

Valuation    No changes to our TP of RM2.28 based on a 21% discount* to our FD SOP RNAV of RM2.89.

Risks   Unable to meet sales targets. Delays in launches of catalyst projects like Canal City and Sebana Cove. Sector risks, including negative policies.

Source: Kenanga