Period  4Q15/FY15

Actual vs. Expectations  CRESNDO’s FY15 core net profit of RM43.3m came in below expectations, making up only 66% and 61% of our and streets’ full-year estimates of RM65.7m and RM70.2m, respectively. The disappointment in its FY15 performance was largely due to lower revenue contribution from its industrial properties sales coupled with higher-thanexpected operating costs.

 Its property sales in FY15 was also weaker than expected, as CRESNDO only managed to churn RM185.0m worth of sales vis-à-vis our full-year estimates of RM200.0m with a fulfilment rate of 92.5%, as the property market remains highly challenging especially in Johor.

Dividends  Positively, CRESNDO proposed a final single-tier dividend of 5.0 sen for 4Q15. For FY15, CRESNDO has proposed a total dividend of 12.0 sen implying a net dividend yield of 4.8%. The total dividend proposed was well within our expectations.

Key Results Highlights  YoY, FY15 core net profit of RM43.3m saw a major decline by 49.0%. This was mainly due to the 13.0% decrease in its revenue of RM268.6m coupled with margin compression on its EBITDA by 9.8ppt to 30.2%. These were mainly due to lower proportion of industrial properties sold, which generally commands superior margins as compared to residential and commercial properties.

 QoQ, 4Q15 core net profit saw a sharp decline by 71.0% to RM5.2m in 3Q15 despite a revenue growth of 4.0%. This was mainly due to higher operating costs that soared 25.0% in 4Q15 as a result of higher administrative expenses and also provisioning for doubtful debts for its management and services division amounting to RM2.3m.

Outlook  Management remains cautious with the property outlook in Johor given the “oversupply” phenomena of high-rises in the region, coupled with tighter lending environment and the implementation of GST. Hence, management are planning their launches carefully, focusing mostly on landed residential (GDV: RM100.0m) and commercial/industrial (GDV: RM100.0m) properties in Bandar Cemerlang and Taman Perindustrian Cemerlang.

Change to Forecasts  Following the disappointing results, we lowered our FY16E core net profit by 44.0% to RM44.5m, after we revisited our cost assumptions and also lowered sales assumption to RM170.0m (previously RM209.0m) for FY16E.

 Its unbilled sales stand at only RM78.0m as of FY15 and will only provide the group another 6 – 8 months of visibility.

Rating UNDER REVIEW

Valuation  Our call and target price are currently UNDER REVIEW pending our upcoming property sector report update in the beginning of April. Our previous recommendations are MARKET PERFORM with a TP of RM2.46 based on 61% to its FD RNAV of RM6.32.

Risks to Our Call  Weaker-than-expected property sales.

 Higher-than-expected sales and administrative costs.

 Negative real estate policies.

 Tighter lending environments.

Source: Kenanga