Period  3Q13 / 9M13

Actual vs. Expectations 9M13 net profit of RM209.9m was within street and our expectations, making up 73% and 76% of full year forecasts, respectively.

Dividends  None as expected.

Key Results Highlights YoY, 9M13 earnings increased by 19.8% mainly buoyed by a 7.6% YoY revenue growth. The improvement was also attributable to the increasing progress billings from mixed developments such as M-Suites, M-City, Icon City, Icon Residence and etc. Pretax margin expanded by 1.3ppts, which was a result of higher margin product mix and higher interest income (+91%).

 QoQ, 3Q13 pretax profit declined 4.3% to RM92.1m despite a 12.8% increase in revenue. Pretax margin declined by 3.1ppts because the previous quarter saw closing sales of certain higher margin products such as bungalow lots @ Garden Residence and shop offices @ Star Avenue (Sg.Buloh) as compared to the much lower margin products that were recognized in 3Q13 which included Garden Plaza and the retail mall @ Star Avenue.

 9M13 sales of RM2.25b are on track to meeting our and the company’s FY13E sales target of RM3.0b. It will likely be driven by the recent previews that worth more than a billion dollar of GDV from Savanna@Bangi and D’sara Sentral, which we understand have seen promising take-ups.

Outlook  Going-forward, we remain positive on the company given its healthy unbilled sales of RM4.2b which provides up to 2 years earnings visibility. Meanwhile, we are looking forward to more new launches of ongoing projects including M Residence 1&2 @Rawang, Southville City, D’sara Sentral, Meridin@Medini and new projects that include Lakeville Residence and Bandar Meridin East (known as Bandar Bestari Perdana previously). These are largely a mix of affordable housings, as well as, midhigh ones (priced below RM1m/unit).

Change to Forecasts Maintaining earnings forecast of RM275m and RM336m for FY13E and FY14E.

Rating Maintain OUTPERFORM In line with our sector call. Notably, the stock is trading near trough valuations at FY13E-FY14E PERs of 8.9x-7.3x and Fwd PBV of 1.6x-1.4x, respectively.

Valuation  Maintain TP of RM2.56. Our TP is based on a 20% discount to our FD RNAV of RM3.20.

Risks to Our Call Unable to meet sales targets. Sector risks, including negative policies.

Source: Kenanga