Period    3Q12/9M12

 

Actual vs.  Expectations  The 9M12 net profit (NP) of RM127.2m was broadly in line with the consensus estimates and ours, making up 60.6% and 57.0% of the street's estimate and our forecast of RM209.7 and RM223.2m respectively. Note that the 9M results typically contribute around 58%-73% of the full year earnings.  

Dividends   No dividend was declared in the quarter.

Key Result Highlights    QoQ, the company typically performs better in the 2H. Thus, the 3Q12 revenue improved QoQ by 11.3% as the company made higher sales during the Hari Raya festive season in the quarter. In tandem, the NP QoQ also grew significantly by 34.3% despite a higher tax bracket for the quarter. 

 YoY, the 3Q12 revenue increased by 12.6% on the back of the better growth rate from the retail segment (+11.8% YoY) and property management services (+18.1%). The better performance of the former was due mainly to new stores opening and the reopening of another store (which was temporarily closed for an upgrade in Aug 2011). Meanwhile, the strong growth from the latter was attributable to new shopping centres and benefits gained from the tenants revamp in some of its existing shopping centres. Nevertheless, the 3Q12 NP grew a slower 5.3% YoY due to a higher tax bracket charge. 

 YTD, the  9M12 revenue also registered a 10.5% growth YoY due to the abovementioned reasons. However, the 9M12 NP grew a slower 2.5% YoY due to a one-off recognition of net proceeds from an insurance claim of RM10.9m in respect of business interruption and damages arising from the fire incident in one if its shopping centres in Melaka in 1Q11. Excluding the oneoff proceeds (hence a lower base last year), the company would have registered a better YoY NP growth of about 9.2%. 

Outlook   We expect the new outlet in Seri Manjung, Perak, which will be opened soon in early Dec, to have a positive contribution to FY13 earnings. Meanwhile, we remain positive on the company's future prospect as there will be three more new outlet openings in FY13-14 as well as the refurbishment of the existing ones.

Change to Forecasts    While better sales were achieved in the 3Q, we believe the coming 4Q should be even stronger due to the festive seasons. Thus, we are maintaining our earnings estimates of RM223.2m and RM251.8m for FY12-13E.

Rating     Downgraded to UNDERPERFORM

Despite an adjusted higher TP below, the limited upside of the share price to the TP has led us to downgrade the stock's rating to an UNDERPERFORM. 

Valuation    We have revised our TP higher to RM11.30 (from RM10.70 previously), based on a PER of 15.8x, which represents a +2SD to the 5-year average PER of 12x (vs. 15.0x at +1.5SD previously), over FY13 EPS (see overleaf for details). 

 

Risks   A slowdown in the global economy, which will cut the purchasing power of consumers.

Source: Kenanga