Period

4Q15/FY15

Actual vs. Expectations

FY15 core earnings of RM257m missed market expectation but met ours, making up 85% of street’s estimates and 102% of ours. We reckon market was too bullish with the billings assumptions.

FY15 sales of RM2.36b beat our target of RM2.0b but is within management’s FY15E range of RM2.0-2.4b and sales were largely driven by Australia (59%) followed by local Central region (28%) while the Southern region was the weakest.

Dividends

Proposed first and final dividend of 1.6 sen (1.6% yield, -47% YoY) which missed our estimate of 2.5 sen.

Key Results Highlights

QoQ, core earnings was up by 52% on higher recognition from Aurora@Melbourne* service apartment block, which was sold en bloc while billings is already underway, sale of Imperia office and their Signature Selection marketing campaign for unsold projects.

YoY, FY15 core earnings was down by 46%, inline with revenue decreasing by 34% given less lumpy land sale deals, less billing on the back of weaker local sales and contributions from associates/JCE (-8%).

Outlook

The group targets FY16E sales of RM1.5b (-36% YoY), which will be largely driven by its Australian project (refer overleaf). However, the group did not reveal their other KPIs (e.g. PATAMI growth, ROE targets). Change to

Forecast

Reduce FY16E sales by 25% to RM1.5b and post housekeeping, FY16E core earnings is lowered by 7%. Unrecognized revenue of RM4.7b provides 2 years’ visibility.

Rating

Maintain MARKET PERFORM

Valuation

No changes to TP of RM1.07 base on 75% discount (close to historical peak of 80%) to its FD RNAV of RM4.29. The applied discount is one of the steepest under our coverage due to its high exposure in Johor. We also see no near-term catalysts to re-rate the stock, other than the privatisation rumours, which we reckon is unlikely.

Risks

(i) Balance sheet risk, (ii) weaker-than-expected property sales, (iii) higher-than-expected sales and administrative costs, (iv) negative real estate policies, and (v) tighter lending environment.

Source: Kenanga Research - 26 Feb 2016