Period     1Q13

Actual vs. Expectations    1Q13 net profit of RM211m is considered broadly inline, although it made up 36% of street and 39% of our estimates. 1Q13 is distorted by the recognition of Puteri Harbour land sale to Liberty Bridge for RM400.8m.

Excluding the land sale, the group recorded RM956m sales (+235% YoY) from Malaysia, which was proportionately ahead of our estimates (refer overleaf).  

Dividends    None, as expected. 

Key Results Highlights     YoY, net profit rose by 290% due to the said land sale which registered a net gain of c. RM180m. It is also the reason for the 14.9ppt improvement in EBITDA margins to 40.3%. 

QoQ, net profit was up by 5% but stripping-off land sales for each quarter, net profit was lower by 71% QoQ to RM31m. However, this is expected because 1Q progress billings tend to be one of the weakest quarters (typically <15% of full year contributions). This is also after seeing more normalized effective tax rate of 25.7% vs. last quarter’s 10.4%.

Outlook    Although subsequent quarterly profits may not be as strong as 1Q13 given its lumpy land sales, management is confident of seeing increasing property billings. Although 1Q13 sales appear to be proportionately ahead of our assumptions, we maintain our FY13E sales at RM3.0b as the major launches (CS1@Puteri Harbour, MK22, D’Estuary) will likely be launched towards 4Q13.  

Change to Forecasts     No changes to estimates as subsequent quarters will see more normalized quarterly earnings from on-going property billings. Unbilled sales are at a record high at RM3.55b which provides 1.5 years visibility. 

Rating  Maintain OUTPERFORM

Valuation     Raised TP to RM4.62 which will be on parity to its FD SoP RNAV (previous TP of RM3.60 was based on 22% discount to FD RNAV of RM4.62). We are removing our discount factor as the Iskandar play is becoming more realisable by the day given strong foreign and local investors support.  UEMLAND is the best news-flow proxy to Iskandar and IWH’s upcoming listing will lend strength to its valuations. UEMLAND is our 2Q13 Top Pick.  

Risks    Unable to meet sales target. An up-cycle in Singapore’s property sector. Sector risks, including negative policies.

Source: Kenanga