Period

1Q15 Actual vs. Expectation s

CRESBLD recorded core net profit of RM3.5m for 1Q15, which was within our expectation, accounting for 22% of our full-year estimates of RM15.7m.

Dividends

No dividends declared for the quarter as expected. Key

Results

Highlights

YoY, 1Q15 core net profit saw a massive improvement by 300% to RM3.5m, underpinned by revenue growth of 26%, EBITDA margin expansion by 2.8ppt to 33.1%, and a huge reduction in minority interest by 83%. The improvement in revenue was driven by better progressive billings in its construction and property division. While the expansion in margins was due to major improvements in its construction division that saw operating margin expanding by 27.3ppt to 31.9% as the contribution from UniTapah kicked in.

QoQ, its 1Q15 core net profit of RM3.5m was down by 45% due to a major reversal of minority interest contribution amounting to RM11.6m back in 4Q14 due to the issuance of the Sukuk for UniTapah. On pre-tax level, it registered pre-tax profit of RM9.1m vis-à-vis 4Q14 pre-tax losses of RM2.8m mainly due to the reasons stated above.

Outlook

Its outstanding external construction orderbook and unbilled sales stands at c.RM300m and c.RM45m, providing at least 1 – 1.5 year of visibility.

Their planned launches valued at RM1.3b for its property division in 2H15 is still on-track. The launches consist of flagship development The Bank @ Dang Wangi (GDV: RM1.0b) and also Hijauan Residence (previously known as 3 Stones, GDV: RM0.3b). As for its construction division, management are still targeting more orderbook replenishments in 2H15 mostly similar to its previous replenishment (building jobs).

Change to Forecasts

No changes to our FY15-16E earnings.

Rating

Maintain MARKET PERFORM

Valuation

We maintain our MARKET PERFORM call with an unchanged Target Price of RM1.27 based on SoP, of which we applied 71% discount to its property RNAV, one of the steepest discount under our coverage (vs. sector average of 55%).

Risks to Our Call

Weaker-than-expected property sales and construction orderbook replenishment.

Higher-than-expected sales and administrative costs.

Negative real estate policies.

Tighter lending environments.

Source: Kenanga Research - 21 May 2015