CRESNDO’s FY17 CNP of RM28.9m is within expectation, accounting for 103% of our estimate. No property sales figure was disclosed by management. A 3.0 sen dividend was declared, bringing full-year dividend to 5.0 sen as expected. No changes to FY18E earnings and we roll out our FY19E earnings of RM34.6m. Maintain MARKET PERFORM with an unchanged Target Price of RM1.70.

Within expectations. FY17 CNP of RM28.9m (after reversing its positive tax credits of RM4.1m) came within expectation, making up 103% of our full-year estimate. No sales figure was given by management, but we expect them to exceed our full-year sales estimates of RM235.0m. A 3.0 sen dividend was declared, bringing full-year dividend to 5.0 sen as expected.

Results highlight. FY17 CNP registered an impressive growth of 62% underpinned by the 31% improvement in revenue, driven by its property division, which saw 72% improvements in development revenue thanks to the higher billings of its on-going projects, i.e. Bandar Cemerlang as they registered higher sales as compared to last year. That said, its management services division also saw its revenue and operating income increasing by 50% and 37%, respectively.

QoQ, 4Q17 CNP declined by 8% albeit a 17% improvement in revenue, mainly due to higher operating costs incurred by its manufacturing division coupled with lower sales of concrete products.

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 concentration in the Johor region, while the Group remains cautious on launches going forward.

No changes in earnings. Post results, there are no changes to our FY18E earnings as we are anticipating margins to be lower despite the growth in revenue due to higher mix of residential products sold which commands lower margins as compared to industrial products. That said, we also roll out our FY19E earnings of RM34.6m. Its unbilled sales currently stand at RM158.0m, which provides earnings visibility for at least a year.

Maintain MARKET PERFORM. Despite its outstanding performance, we are still keeping our MARKET PERFORM call on CRENSDO with unchanged Target Price of RM1.70 based on our 73% discount to FD RNAV of RM6.32.

While the property market remains challenging especially in Johor, CRESNDO’ has demonstrated its ability to position itself as an affordable property player which has garnered strong interests for serious buyers of reasonably priced landed properties in Johor despite a soft market environment.

However, its Fwd. PER are almost on par with some of the big-cap developers which means that earnings levels need to be raised further before further re-rating can take place.

Source: Kenanga Research - 31 Mar 2017