Period

4Q15/FY15

Actual vs. Expectations

FY15 core earnings of RM357m met expectations, accounting for 95% and 96% of street’s and our estimates, respectively. Our core earnings estimate excluded the FV adjustment of RM30m.

FY15 sales of RM2.3b (-33% YoY) met our and management’s target of RM2.3b*.

Dividends

Proposed first and final dividend of 6.5 sen (5.0% yield), inline with our expectation of 6.4 sen.

Key Results Highlights

QoQ, 4Q15 core earnings was down by 23% as the group prudently made provision of RM41m while topline was flattish.

YoY, FY15 earnings was up by 5% on higher billings while the group’s pretax margin was stable at 15.9% (+0.2ppt).

Outlook

The group is targeting FY16E sales of RM2.3b (flat YoY). Majority of its launches are skewed towards affordable housing (e.g. apartments@Southville, affordable landed@Meridin East, landed housing @M Residence (Ph1-3), last blocks of Dsara Sentral and Lakeville). They are also launching Ferringhi Residence.

Change to Forecasts

Tweaking FY16E sales to RM2.3b from RM2.4b, and post housekeeping, our FY16E earnings estimate is adjusted slightly lower (-3%). Its unbilled sales of RM4.75b provides about 1.5 years of visibility.

Rating

Maintain MARKET PERFORM

Valuation

Maintain TP of RM1.35 based on 55% discount (close to 6-year mean) to its FD RNAV of RM2.99. The stock is near 6-year trough valuations (7.7x) as it is trading at 8.3x FY16E core PER and FY16E net yield of 4.9% which may limit downside risks. While this appears attractively low, we reckon investors are concerned that the overall property earnings cycle may be due for a de-rating while near-term catalysts are not visible.

Risks

(i) Weaker-than-expected property sales, (ii) Higherthan- expected sales and administrative costs, (iii) Negative real estate policies, and (iv) tighter lending environments.

Source: Kenanga Research - 29 Feb 2016