1Q17 CNP of RM10.6m (11%) and sales of RM124.4m (14%)were broadly within our expectations as earnings are still in the process of normalizing. No dividends, as expected. Maintain strong FY17-18E sales growth of 94- 25% YoY while earnings normalization resulted in CNP leaping by 167-60%, with expectations of dividends to start in FY17. Landbanking and more JVs are expected to unfold. Reiterate OUTPERFORM with a TP of RM1.50.

1Q17 CNP of RM10.6m was broadly within expectations at 11% of our FY17E estimates due to the timing of recognition, which are skewed towards the subsequent quarters. Sales of RM124.4m are also deemed as broadly within due to the timing of FY17 launches, which are skewed to 2H17. Key sales drivers are the recently launched Olive at Sunsuria City, Jasper, The Forum 1 and Suria Residence. No dividends, as expected.

Results highlights. YoY-Ytd, 1Q17 top-line was up by a staggering 187% due to ongoing projects (i.e. Suria Residence, The Forum 1, Bell Avenue, Jasper Square and Olive), with 41% of revenue from the Groups flagship project, Sunsuria City. Group EBIT margin appeared lower at 29.0% (1Q16: 37.4%) due to distortions from investment holdings but its main driver, property EBIT margin saw a sharp improvement to 31.3% (vs.9.9% in 1Q16). This coupled with slightly lower effective tax rates allowed core net profit to grow by 66%. QoQ, top-line was down by 27% on slower timing of billings at The Forum 1 which had just seen completion of its structural works and Olive is likely at substructure stages i.e. low recognition stages while there was an absence in dividend income from an associate seen in 4Q16, resulting in the group's EBIT margin compressing by 10.2ppt to 29.0%. However, Property EBIT, its main driver, maintained margins at 31.3% (+0.2ppt).All in bottom-line was down by 56%.

Launches back loaded to 2H17. So far, SUNSURIA has launched Olive at Sunsuria City (GDV: RM284m) in FY17, while the Group plans to launch a total of RM1.55b in FY17 suggesting that most launches will be back loaded towards 2H17. The bulk FY17-18E launches will be affordable or mid-market residential priced below RM700k/unit from Sunsuria City.

Maintain FY17-18E sales of RM0.89b-RM1.1b while keeping earnings estimates unchanged. Unbilled sales of RM485m provide 1.3 years? visibility. Going forward, FY17E net gearing will be light at 0.14x with expectations of aggressive landbanking while we expect more partnerships (e.g. Welcome Global) to materialize. Additionally, we expect SUNSURIA to commence dividend pay-outs in FY17-18E (2.3%-3.7% yields).

Maintain OUTPERFORM with a TP of RM1.50 based on 41% SoP discount to its FD SoP of RM2.52. The applied discount is within our small-mid cap developers? range of 25%-86%. Our TP implies a 2- year average 9.9x Fwd PER vs. small-mid cap?s 7.9x which we think is justifiable considering that earnings normalization will be over the next 2-3 years as its average 2-year forward earnings growth is 114% vs. small-mid cap peer average of 2%.

Risks include weaker-than-expected property sales, margin fluctuations as well as changes in real estate policies and/or lending environments.

Source: Kenanga Research - 28 Feb 2017