Period  2Q14/1H14

Actual vs. Expectations Crest Builder Holdings (CRESBLD)’s 1H14 core net profit of RM5.2m accounted for only 23% of our fullyear

estimates of RM23.2m. However, we deem the results as broadly inline as we were expecting a stronger 2H14 driven by potential full earnings consolidation from UniTapah in 2H14.

Dividends  No dividend was declared as expected.

Key Results Highlights YoY, CRESBLD’s 1H14 core net profit of RM5.2m saw a sharp decline by 87% from RM40.4m previously on the back of an 18% decrease in revenue. However, the main drag in earnings was due to lower other operating income that saw a huge decline from RM55.4m to RM1.9m (-97%).

 QoQ, its 2Q14 core net profit improved significantly by 396% to RM4.4m following a 15% improvement in revenue. At the same time, EBITDA margins also saw an improvement by 14.5ppt to 44.9%. The major driver to the improved revenue contribution from all divisions especially construction which saw significant increase in operating profit to RM6.4m (+248%) followed by its property division’s operating profit of RM15.1m (+61%) driven by better billings from its existing projects.

Outlook  CRESBLD has unbilled property sales of c.RM100m with at least one year of earnings visibility.

 We are still expecting its first Transit Oriented Development (TOD) project namely The Bank @ Dang Wangi with an estimated GDV of RM1.4b to be launched by year-end as the strengthening works on its substructure have already begun.

Change to Forecasts No changes to our FY14-15 earnings estimate at this juncture as we are expecting a stronger 2H14, to be driven by the full-earnings consolidation from UniTapah as we expect management to increase its stake in UniTapah up to 100% and we might look to  fine tune our forecasts post an analysts’ briefing.

Rating UNDER REVIEW

Valuation  While we still like the stock given its niche Transit Oriented Development, we are reviewing our CALL/TP pending a briefing. Our previous call was OUTPERFORM with a TP of RM1.62 based on SoP.

Risks  Unable to launch its TOD projects.

 Slower-than-expected progressive billings.

 Lower-than-expected construction orderbook replenishment.

Source: Kenanga