Period    4Q12 / FY12

 FY12 core earnings of RM35.9m were within expectations as it made up 105% of our estimates. 

Dividends   Proposed final single-tier dividend of 5.6sen (3.8% yield) was higher than our 4.4sen FY12E NDPS. 

 YoY, FY12 reported net profit increased 60% to RM101.7m largely due to RM69.3m fair value adjustment gains relating to Gurney Paragon Mall (GPM). Stripping-off the non-cash fair value gains and RM4.8m write-off (relating to civil suite), FY12 core earnings actually dipped 9% YoY due to less new launches and sales. However, the decline would have been worse if it weren't for the 14.9ppt enhancement in property operating margins from sale of completed GPC products. 

 QoQ, 4Q12 core earnings fell 34% to RM8.5m. Not only were there less sales of completed GPC products, property operating margins compressed 15.5ppt to 35.0% because of the said write-off and recognition of Bandar Putra Bertam (BPB) Phase 3 semi-D sales which have lower margins vs. GPC. 

 FY12 sales of RM126m (-7% YoY) was largely driven by GPC and BPB or 87% and 11% of sales respectively. GPC take-ups improved to 92% (+3ppt QoQ), while BPB achieved 33% take-ups. 

Outlook   To date, the group has only launched BPB Phase 3 semi-D (GDV: RM33m) and intends to launch a series of double-storey terrace house in the same phase (GDV; c.RM60m). Over FY13, we believe the group will continue to focus on completing its GPM Phase 2 works and may hold back other launches (e.g. Alila 2). As a result, we expect FY13E sales of RM83.3m (-34% YoY). 

 Reducing FY13E core earnings by 26% to RM15.8m as we delay Alila 2 launch to FY14E and assume the said launches in BPB. Unbilled sales of RM7m provide limited visibility. 

Rating  Downgrade to UNDERPERFORM

 The stock is trading at trough 0.47x Fwd PBV. However, we see no further upside to our TP due to declining profit trends, lack of sizeable new launches in the immediate term.

Valuation    Maintain TP of RM1.50 on 53%* discount to our updated FD SoP RNAV of RM3.20. 

Risks   Sector risks, including negative policies.