Period  3Q13 / 9M13

Actual vs. Expectations 9M13 core earnings of RM235m came within our expectations, making up 72% of our and 70% of street estimates. Sales for the period amounted to RM1.57b which accounts for 87% of our full year estimates, but we deem it to be within expectations (refer overleaf).

Dividends  None, as expected.

Key Results Highlights QoQ, 3Q13 core earnings of RM41m dipped by 48% on the back of a 27% decline in its topline. Property billings were significantly slower due to the Puasa/Raya month. Group gross margins were also compressed, by 11ppt, to 38.7% as the previous quarter saw sale of high-margin inventories from Binjai 8 and Kepong Business Park. Furthermore, there was more recognition of projects at early stages, which dragged margins lower. The quarter also saw non-cash fair value gains arising from its investment properties.

 YoY, 9M13 core earnings was flat (+2%) although topline grew by 42%. This was due to higher recognition of construction billings this year arising from their associate project, Kencana Square. However, group pretax margin was dragged down 8ppt to 34% as margin is lower in construction compared to property development.

Outlook  The group announced its acquisition of a 13.5ac piece of land in Sentul for RM130.3m with a planned GDV of RM2.0b and we raise our FD RNAV by 7% to RM3.67.

Change to Forecasts Lowered FY13E and 14E core earnings estimates by 6% and 18%, respectively. However, management remains confident of maintaining its dividend payout given its strong net cash position and thus, we maintain FY13E and 14E net dividend yields of 6.4% each. (Refer overleaf).

Rating Maintain MARKET PERFORM

 Although we are positive on the acquisition, the group has high exposure to DIBS. As a result, we believe that FY14 sales performance will be toned down although they may combat it with more affordable products.

Valuation  Trim TP to RM2.10 from RM2.30 previously (refer overleaf).

Risks to Our Call  Sector risks, including weaker sales, negative policies and disappointing dividends.

Source: Kenanga