Period    3Q12/9M12

Actual vs.  Expectations   The 9M12 core net profit of RM73.6m came in above ours and the street's estimates, making up 100% and 86% of ours and the consensus' FY12E core net profit of RM73.7m and RM85.7m respectively.

Dividends   No dividend was declared for this quarter.

Key Results Highlights    YoY, the 9M12 core net profit improved significantly by 80% from RM40.9m to RM73.6m underpinned by its property sales growth of 90% (from RM81.6m to RM155.1m) coupled with an improved operating margin in its construction division by 13.7ppt (from 4.3% to 18.0%) due to certain high-margin projects, e.g. Bengoh Dam.

 QoQ, its 3Q12 core net profit improved marginally by 2%, predominantly due to a better operating profit recorded for its construction division of RM18.6m (>100%) albeit a slide in the property's operating profit from RM13.8m to RM6.9m (-50%) coupled with a lower effective tax rate of 2% from 11% previously. Its 33.6% subsidiary, Dayang, continued to record a stronger set of results, further contributing RM13.9m (+32%) to Naim's profit before tax for the current quarter.

Outlook   To date, Naim's outstanding order book stands at c.RM1.0b, which would provide earnings visibility for the next four years.

Change to Forecasts We have increased our FY12-13 earnings forecasts by 30% and 23% respectively as we had lowered our FY12 effective tax rate assumption due to certain non-taxable incomes derived over the last two quarters and after factoring in a higher associate and joint venture contribution.

Rating      MAINTAIN OUTPERFORM

 Maintaining our OUTPERFORM recommendation as there is an attractive upside of 42% to our TP of RM2.62.

Valuation    We have revised our Target Price higher from RM2.46 to RM2.62 based on SOP valuation after raising our FY12-13 earnings above.

Risks   Delays in existing construction projects.

 Escalating building material prices

Source: Kenanga