Period  4Q13 / FY13

Actual vs. Expectations Crest Builder (CRESBLD) registered core net earnings of RM32.7m for FY13. The results well exceeded our forecast and consensus estimates by 36%. The better-than-expected performance was mainly due to lower-than-expected financing cost. In the fourth quarter, the group had a reversal of over accrued finance cost amounting to RM15.5m.

Dividends  A final single tier dividend of 3.75 sen was recommended, but was slightly below our full-year dividend expectations of 4.3 sen.

Key Results Highlights For the full-year, CRESBLD’s registered a net profit of RM46.6m which is inclusive of a fair value gain of RM14.6m on the revaluation of its investment properties. Stripping that off, it still registered core earnings of RM32.7m that shows 56% improvement from its FY12 performance.

 The improvement in earnings was mainly supported by better contribution from its construction and property development segments whereby both further saw 8.9ppt and 15.5ppt enhancement on its operating margin, respectively. The margin enhancements on both of these segments are attributable to the handover of its construction projects and also contribution from its newly launched development project Alam Sanjung.

 YoY, its 4Q13 core earnings saw a huge improvement of 87% to RM14.1m underpinned by the spike in other operating incomes (+579%), coupled with the reversal of over accrued finance cost and also lower effective tax rate.

Outlook  For FY14, CRESBLD will mainly focus on its affordable housing project in Batu Tiga (Alam Sanjung, GDV: RM300m) while working for the launch of its Dang Wangi and Malaysian Rubber Board projects. Apart from that, its concession income from UniTapah (c. RM40m p.a.) is expected to contribute to the group’s earnings this year.

Change to Forecasts No changes in earnings estimate at this juncture, as we are looking to review our earnings estimates post its results briefing, which is slated to be held on 5^th March 2014.

Rating Maintain OUTPERFORM

 We reiterate our OP call on CRESBLD as it is still well positioned in the affordable housing market with its Batu Tiga projects. The next re-rating catalyst would be the launch of its long-awaited Dang Wangi and MRB projects by year end.

Valuation  Maintaining our SoP based TP at RM1.73.

Risks to Our Call Failure to meet sales targets or replenish orderbok and landbank. Sector risks, including negative policies.

Source: Kenanga