CRESNDO’s 1H17 core earnings of RM13.5m came in within expectations, making up 53% of our full-year estimate. A 2.0 sen dividend was announced, which is within full-year expectation of 4.4 sen. 1H17 sales at c.RM170.0m worth of sales which accounts for 100% of our FY17E sales target. Raised FY18E core earnings by 8.7% with a higher sales target of RM197.0m for FY17. Maintains MARKET PERFORM, TP remains unchanged at RM1.60.

Within expectations. 1H17 CNP of RM13.5m came in within expectations, accounting for 53% of our full-year estimate. A 2.0 sen dividend was announced, in line with our full-year expectation of 4.4 sen. 1H17 sales is fairly strong at c.RM170.0m, making up 100% of our sales target for FY17.

Results Highlights. It’s 1H17 CNP saw a growth of 5%, underpinned by several factors; (i) marginal growth in revenue (+1%), (ii) increase in other income (+16%), and (iii) lower minority interest contribution (- 19%). QoQ, its 2Q17 top line growth was well supported by its property division, which grew 24%, backed by better progressive billings from its existing projects. CNP grew 9%, largely due to similar reasons above.

Outlook. We are of the view that the near-to-mid-term outlook for CRESNDO remains unexciting due to its exposure in industrial property and projects concentrated in the Johor region, while the Group remains cautious on launches going forward. Whilst the MYR remains weak, domestic confidence issues are keeping industrial property investors on the side-lines.

Raising FY18 estimates. While we make no changes to our FY17E core earnings, we are raising our FY18 estimates by 8.7% to RM31.6m as we raised our FY17 sales target to RM197.0m from RM170.0m previously. Its unbilled sales currently stand at RM170.0m, which provides earnings visibility for at least a year.

Maintain MARKET PERFORM. We are keeping our MARKET PERFORM call on CRENSDO with an unchanged Target Price of RM1.60 based on 75% discount to its FD RNAV of RM6.32, given CRESNDO’s ability to position itself as an affordable property player which has garnered strong interests for serious buyers for reasonably priced landed properties in Johor despite a soft market environment.

Source: Kenanga Research - 30 Sep 2016