Period  4Q13/FY13

Actual vs. Expectations  FY13 core earnings of RM19.8m met market expectations but exceeded ours as it was ahead of both consensus and our estimates by 3% and 12%, respectively.

Dividends  Declared special interim share dividend based on 25 treasury shares for 1000 existing shares. Based on the last traded share price, this translates to 5.03 sen/share. On top of that, the group is also proposing a final single-tier dividend of 5.60 sen. Hence, implied entitlements for FY13 are 10.63 sen (5.2% yield).

 This is a pleasant surprise and the rationale of the special share dividends is to commemorate the transformation of Hunza from a developer into a real-estate landlord following the completion of Gurney Paragon Mall (“GPM”).

Key Results Highlights  YoY, FY13 core earnings fell by 47% largely due to lack of new launches over the last 2 years while sales of its completed properties (e.g. GP Condo and Infinity) are also at their tail-ends. EBIT margin was compressed by 2.0ppt to 30.2% due to start-up costs from GPM and recognition of more BPB projects (lower margins vs. GP Condo and Infinity).

 QoQ, 4Q13 net profit rose to RM152.8m due to RM146.1m fair value gains arising from GP Condo, which commenced its soft launch in Jul-13. Excluding that, core earnings rose by 339% to RM6.7m on the back of EBIT margins improvements by 16.3ppt to 35.3% due to higher billings and sales of inventories.

Outlook  The group will be launching a new phase in BPB with GDV of RM60m. They also intend to kick-off their Juru land project (integrated project) with an initial phase of RM700m GDV comprising service apartments; but we will only build this into our estimates/valuations when we have more details, i.e. timeline and stage of planning. GPM is now 85% tenanted and is expected to hit 95% tenancy by year end.

Change to Forecasts  Increasing FY14E core earnings by 20% to RM20.6m given the new BPB launch and commencement of income stream from GPM. Although we still expect development earnings to decline YoY, it appears that the stronger-thanexpected occupancy and rental rates of GPM could more than negate the former. Unbilled sales of RM7m provide <6 months earnings visibility.

Rating   Maintain MARKET PERFORM

Valuation  No changes to TP to RM2.09 based on 35% discount to FD RNAV of RM3.20.

Risks  Sector risks, including negative policies

Source: Kenanga