Period  4Q14/FY14

Actual vs. Expectations  FY14 net profit of RM213m (-8% YoY) was within expectations, making up 102% and 100% of our and street’s full-year estimates, respectively.

Dividends  As expected, a first and final interim dividend of 5.0 sen was declared.

Key Results Highlights FY14 vs. FY13, YoY  Earnings down 8%, no thanks to weaker retail business which saw a decline of 31% in operating profit. However, this was mitigated by a commendable performance from its property management division (+25%).

 We understand that the retail segment was sluggish mainly due to: (i) weaker sales mix, (ii) more promotional activities in conjunction with its 30 years anniversary in Malaysia as well as (iii) higher utility and initial costs related to new stores opening.

 On the other hand, its property management business did well due to: (i) new shopping centres opening, (ii) higher rental from tenants revamp, and (iii) one-time gains of RM14.2m from the disposal of land and building of AEON Taman University Shopping Centre. Stripping this away, operating profit from this division would have gone up by 16% instead of 25%.

4Q14 vs. 3Q14, QoQ  Quarterly profit was up 72% mainly thanks to stronger revenue registered by both its retail and property management businesses (+4%). This can be explained by its high operating leverage, which saw 3Q14 profitability being mediocre without a boost from topline.

Outlook  We continue to see headwinds in its retail business given that consumer sentiment is likely to remain weak due to rising inflationary pressure. Consequently, this will dampen discretionary spending in the consumer space.

 On the other hand, its property management division should fare well on the back of higher rental rates from tenants revamp in some of its existing shopping centres coupled with new shopping malls opening.

Change to Forecasts  Since FY14 results was inline, we keep our FY15E earnings at RM215m and introduce our FY16E. We expect FY16E net profit to grow 3% to RM222m.

Rating Maintain UNDERPERFORM

Valuation  We retained our TP at RM3.10 based on an unchanged 20.3x FY15 PE. To note, the valuation yardstick is slightly below the +0.5 SD of its 5-year average forward PE.

Risks to Our Call  Faster-than-expected recovery in consumer sentiment.

 Lower-than-expected opex. 

Source: Kenanga