Period  4Q14/FY14

Actual vs. Expectations  FY14 core earnings of RM13.9m came in above our expectation, at 131% of our full-year estimates of RM10.6m (consensus is unavailable). The sterling performance was mainly due to a one-off cost arising from UniTapah’s Sukuk issuance and refinancing, which resulted in the reversal of minority interest contributions amounting to RM11.6m in 9M14.

Dividends  Management has proposed a first and final single tier dividend of 3.75 sen implying a net dividend yield of 3.0%, which also came above our expectations of only 1.6 sen.

Key Results Highlights  YoY, its core earnings plunged by 58% to RM13.9m on weaker revenue (-6%) coupled with compressions in its EBITDA margins (-3ppt). The decline in revenue was primarily due to lower contribution from its construction division (-43%) as CRESBLD has minimal external construction jobs at hand in FY14, while the compression in margins was due to higher construction costs incurred for its UniTapah projects.

 QoQ, CRESBLD recorded a pre-tax loss of RM2.8m in 4Q14 vs. pre-tax profit of RM9.6m in 3Q14. However, it registered core earnings of RM6.5m (+197%) despite pretax losses, mainly due to the reversals in minority interests’ contributions for 9M14 which amounts to RM11.6m. The reversal of minority contributions was due to the issuance of Sukuk for UniTapah of which CRESBLD owns a 51% stake.

Outlook  As of FY14, outstanding external construction orderbook and unbilled sales stands at RM120m and RM50m, providing at least one year of visibility.  Moving into FY15, management is targeting RM500m of external construction orderbook replenishments, while planning RM1.3b worth of launches for its property division in 2H15. The RM1.3b of launches consists of flagship development The Bank @ Dang Wangi (GDV: RM1.0b) and also Hijauan Residence (previously known as 3 Stones, GDV: RM0.3b).

Change to Forecasts  Although FY14 core earnings exceeded expectations, it was largely due to non-operational reasons. We believe it is prudent to trim FY15E core earnings by 13% considering a weaker external orderbook replenishment assumption of RM100m (vs. RM150m previously), and also slower recognitions on its property billings. We believe that Dang Wangi service apartment is unlikely to be launched this year due to the challenging property market, while the group has limited affordable housing products to offer this year.

Rating Maintain MARKET PERFORM

Valuation  We maintain our MARKET PERFORM call with a reduced Target Price of RM1.29 (previously, RM1.30), following our revision in FY15E earnings based on SoP. Our SoP valuation basis is extremely conservative (refer overleaf) as we assume a steep 65% discount for property RNAV while only applying 7x FY15E PER on construction and assuming a steep 30% holding company discount.

Risks to Our Call  Unable to launch its TOD projects.

 Slower-than-expected progressive billings.

 Lower-than-expected construction orderbook replenishment. 

Source: Kenanga