Period  4Q14/ FY14

Actual vs. Expectations FY14 core earnings* of RM330m came in broadly within expectations, being 104% and 106% of street and our estimates, respectively. The results came in slightly ahead of our estimates due to better-than expected billings. Core earnings were derived after RM194m net one-off items (refer overleaf).

 FY14 property sales of RM2.9b (+45% YoY) was within expectations vs. our forecast of RM2.8b. Group sales comprised of its Malaysia projects of RM2.2b (+10% YoY) and its maiden UK project which contributed RM0.7b. 4Q14 sales of RM450m (-10% QoQ, -25% YoY) was weaker due to lack of new launches during the quarter.

Dividends  Declared single tier dividend of 6.0 sen (2.0% yield) which was higher than our estimates of 5.0 sen.

Key Results Highlights QoQ, revenue grew by 47% as it was driven by betterthan-expected billings as its two Penang projects (Light Collection II, Maritime) were delivered during the quarter. While we had expected Rimbayu to be 60% owned (from 50%) by 4Q14, its topline contributions as a subsidiary were higher than expected. However, group core earnings only grew 5% as there was a 49% decline in net interest income while tax expense was higher by 53% due to non-deductible expenses.

 YoY, revenue rose by 64% while core net profit swelled by 71%. Besides higher billings from on-going projects and the reasons mentioned above, EBITDA margins expanded by 3.6ppt to 27.2% due to recognition of higher margin project mix. Its associates/JCE contributions also returned into the black at RM1m vs. FY13 losses of RM10m.

Outlook  The group is taking a cautious stance on the Malaysian property sector and thus, we estimate flattish FY15E sales from Malaysia of RM2.2b. They also believe that 2HCY14 will improve due to pre-GST demand and has timed most of the new launches for that period (refer overleaf). However, investors can look forward to The Light Phase 2 which may see new JV partners soon to manage the integrated commercial development.

Change to Forecasts Revising FY15E core earnings slightly higher by 3% post house-keeping. Our FY15E sales remain unchanged at RM2.2b. Unbilled sales of RM2.0b provide one-year earnings visibility.

Rating Maintain OUTPERFORM

Valuation  No changes to TP of RM3.31 based on 15% discount to its FD RNAV of RM3.89. We continue to like the stock for its large exposures to townships and mass markets, coupled with a light balance sheet. The stock has done well this year with YTD gains of 20%.

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

Source: Kenanga