Period  3Q13 / 9M13

Actual vs. Expectations 9M13 net profit of RM501.2m beat expectations, making up 92% of street consensus and 91% of our estimates. This was due to the earlier-than-expected recognition of the RM182m Puteri Harbour land sale to the consortium comprising of Kuok Brothers, PPB Group and Khazanah Nasional and RM40m sale of Gerbang Nusajaya land to the Ascendas consortium. Both the market and our estimates had expected these land sales to be recognized in FY14. Strippingout these unexpected recognitions, 9M13 earnings met our expectations at 73% of our estimates.

 Sales for the period amounted to RM2.1b (+92% YoY) which accounted for 70% of our expectation and the management’s FY13E target of RM3.0b, which is within expectations.

Dividends  None, as expected.

Key Results Highlights QoQ, 3Q13 bottomline increased by 70% to RM183 for the reasons mentioned above. Stripping-off the said land sale gains, we estimate that earnings dipped by 20% to RM86m; while revenue ( these land sale gains) was flat and there was more recognition of lower margin products during the quarter.

 YoY, 9M13 earnings shot up by 103% due to the reasons mentioned above, in addition to the Puteri Harbour land sales recognition to Liberty Bridge.

Outlook  For the remaining 4Q13, the group has lined up RM2.2b worth of launches. While they have not given us guidance on FY14 target sales, they do expect to do better than FY13 due to more landed residential and affordable housing offerings.

Change to Forecasts Increased FY13E net profit by 17% but lower FY14 earnings by 12% as we have brought forward the said land sales to FY13 from FY14. Unrecognized revenue of RM3.3b provides around 1.5 year visibility.

Rating Maintain OUTPERFORM Valuation

 We lower our TP from RM2.76 from RM3.05 as we widen our discount factor to 40% from 34%. At current prices, the stock is trading at its historical highest discount rate of 51% while its valuations are approaching trough level. We maintain OUTPERFORM with a better medium-term outlook, i.e. towards FY14, where listing of Medini Iskandar (likely mid-2014) and potentially even IWH (end-2014) could lend strength to valuations.

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

Source: Kenanga