OUTPERFORM
Target Price: RM2.30


Period 2Q12 / 1H12

Actual vs. Expectations
The 1H12 core net profit** of RM115m was broadly within expectations, making up 44% of the street?''s FY12E core earnings of RM259m and 43% of our RM269m. We do expect a stronger 2H12 given the recognition of Horizon Offices en bloc sales to LTH (sale price: RM204m).

Dividends  
None as expected.

Key Result Highlights

• YoY, the 1H12 core earnings rose 16% given strong billings from Setapak Green, Binjai 8, Camellia, Le Yuen, etc. However, property pretax margins eased 2.9 ppt to 39.6% due to the timing of cost and revenue recognition, particularly for new projects (e.g. Le Yuen). We expect margins improvements towards 2H12 as the new projects will be at more critical stages of revenue recognition.  
• The 2Q12 core net profit rose 80% QoQ to RM74m largely due to the Horizon Office en bloc sale to DKLS (refer overleaf).  
• The group achieved 1H12 sales of RM0.9b (+71% YoY), which is proportionately ahead of our FY12E target of RM1.2b, including the en bloc sales (refer overleaf).

Outlook  
We believe there is more upside to FY12E sales. The soon-to-be-launched Desa Green has registered extremely strong interest. Assuming Desa Green (GDV: RM600m) achieves a conservative 40-50% SPA take-ups by year-end, we will be looking at raising our FY12E sales target by another c.15%.

Change to Forecasts
Maintaining our FY12-13E earnings estimates pending the company's upcoming results briefing (27/8/12). Unbilled sales of RM0.8b provide c.1 year of visibility.

Rating 
Maintain OUTPERFORM
Investors' need for defensive havens could keep this stock on their radars given its attractive FY12-13E net yields of 7.2%-6.5%, which are higher than the sizeable M-REITs (4.3%-4.5%).

Valuation
We have raised our TP to RM2.30 (from RM1.84) based on a narrower 34%* discount to our FD SoP RNAV of RM3.46. Our TP still implies compelling FY12-13E net yields of 5.8%-5.3%.

Risks
Sector risks including negative policies.


Source: Kenanga