Period  4Q12 / FY12

Actual vs. Expectations    FY12 core earnings of RM21.0m came in above expectation, being 23% ahead of our estimates.

Dividends  Gross dividend of 5 sen was declared, as expected.

Key Results Highlights   QoQ, 4Q12 pretax profit grew tremendously by >100% to RM28.7m, largely due to the fair value gains of RM20.0m arising from revaluation of its investment properties i.e. The Crest office tower, car park lots and two other shop units located in Taman Megah and Sentul.

 YoY, 4Q12 core earnings improved by 10% to RM7.5m. Topline growth of 72% was mainly driven by faster than expected construction revenue recognition (Verticas & Unitapah) which rose 78% coupled with a margin expansion of 2.5ppt in operating margin to 5.2%. However, higher finance cost (+41%) muted some of the positive impact.

 Ytd-YoY, FY12 core earnings grew 30% on better revenue from construction (+43% YoY) and property (+15% YoY), despite a slight margin compression of -0.8ppt in operating margin to 9.5%.

Outlook  Dang Wangi project is expected to be rolled out in 2H13. We also expect CBH to firm its JV project to develop the Lembaga Getah Malaysia (MRB) site (GDV: RM1.33b). Since UniTapah concession earnings are commencing in FY14E, project financing is expected to be ring-fenced; subsequently, it will improve its net gearing to 0.5x from the current 1.0x. Currently, CBH has a tender book size of RM2b contracts, including the single largest Langat 2 water treatment plant.

Change to Forecasts   Raise FY13E estimates higher by 12% to RM22.1m post our house-keeping, improved sales and billings from largely affordable driven property offerings in Batu Tiga, Shah Alam and Tierra Crest's new rental income from leasing the space to UniTar.

Rating   Maintain OUTPERFORM

Valuation  No material changes to our TP of RM1.35 (RM1.34 previously). Although we roll-forward to FY13E valuations, resulting in our SoP increasing to RM1.80 from RM1.49, we have widen our applied holding company discount to 25% from 10% on heighten GE risks.

Risks  Capital management and sector risks; property (negative policies) and construction (slow awards).

Source: Kenanga