1Q17 CNP of RM72.1m met expectations while corresponding sales of RM410m is on track to meet our and management?s FY17E sales targets. No dividends as expected. We anticipate more land banking news and hope that the Titiwangsa land issue is concluded soon. No changes to earnings. Maintain OUTPERFORM and TP of RM1.67.

1Q17 CNP of RM72.1 is within expectations, making up 20% of street?s full-year estimates and 21% of ours. Sales stood at RM410m in 1Q17, which is on track at 23% each of our target of RM1.80b and management?s minimum target of RM1.78b. No dividends, as expected.

Business as usual. QoQ, CNP slid by 16% largely due to the perpetual bond interest incurred (semi-annual payments) while revenue (-3%) and pre-tax margins of 16.7% (+1.5ppt) was relatively steady. YoY, CNP dropped by 30% as core net margin compressed by 4.6ppt to 10.0% on higher fixed expenses; note that 1Q16 CNP excludes RM27m cost incurred relating to the repurchase of convertible bonds and RM5m FV gains. Net gearing remains light at 0.02x and this excludes funds from the RM650m perpetual bond issuance which was only completed in Apr 2017.

Expect more land banking news, given their light balance sheet. We are also waiting for the Titiwangsa land deal issues to be cleared up. In our previous report (29/5/17), we highlighted that the company could potentially take on RM1.3b GDV replenishment based on our assumptions. Taking into account the risk from the Titiwangsa land which could fall through, we have only built in RM700m worth of GDV replenishments in our FD SoP of RM2.80. The group intends to delivery VP on RM637m (+22% YoY) worth of projects in FY17.

No changes to earnings. Unbilled sales of RM3.48b provide slightly more than one year?s visibility.

Maintain TP of RM1.67 based on a property RNAV discount of 48% (in-line with big-cap average) or implied SoP discount of 40% to our FD RNAV of RM2.80. Reiterate OUTPERFORM, in line with our sector tactical play for high-beta stocks while land banking news will keep the stock buoyant.

Risks include: (i) weaker/stronger-than-expected property sales, (ii) margin issues, (iii) changes in real estate policies, and (iv) changes in lending environments.

Source: Kenanga Research - 01 Jun 2017