1H18 CNP of RM22.3m is better than expected, accounting for 73% of our full-year estimate, driven by higher-than- expected margins from its industrial property sales. Its 1H18 property sales of RM125.0m are on track to meet our full-year target of RM221.0m. The 3.0 sen single-tier dividend is higher than full-year expectation of 4.5 sen. Raised FY18-19E CNP by 39%-41%, respectively. Upgrade to OUTPERFORM (previously, MARKET PERFORM) with an unchanged Target Price of RM1.70.

Above expectations. CRENSDO?s 1H18 CNP of RM22.3m is better than expected accounting for 73% of our full-year estimate, driven by higher-than-expected margin from its industrial property sales. Its 1H18 property sales of RM125.0m are on track to meet our full-year target of RM221.0m. The 3.0 sen single-tier dividend is higher than full-year expectation of 4.5 sen.

Results highlight. 1H18 CNP registered a strong YoY growth of 65% underpinned by the decent improvement in several factors, i.e. (i) improvements in revenue (+38%), and (ii) improvements in EBITDA margin by 2ppt to 29%. The improvements in revenue and margins are mainly due to decent progressive billings and contribution from its industrial properties from Taman Perindustrian Cemerlang. QoQ, its 2Q18 CNP improved significantly by 312% backed by 82% improvements in revenue and 12ppt improvement in EBITDA margin due to similar reasons above.

Outlook. Going forward, CRENSDO is looking to launch 24 units of cluster factories at Taman Perindustrian Cemerlang, 268 units of mid- market landed residential properties at Bandar Cemerlang, 54 units of shop offices at Bandar Cemerlang and Taman Desa Cemerlang as well as 426 units of affordable housing at Bandar Cemerlang and Tanjung Senibong with an combined GDV of >RM300.0m. Unbilled sales stands at RM148.8m, providing at least a year?s visibility.

Raising FY18-19E earnings. Post results, we raised our FY18-19E CNP by 39%-41%, respectively, after we factored in higher margin assumption for its property development division due to higher mix of industrial/commercial products over residential products. Subsequently, our full-year DPS was also raised to 6.0 sen from 4.5 sen previously.

Upgrade to OUTPERFORM. In view of its decent sales performance and better mix of industrial product sales coupled with improving profitability, we upgrade CRESNDO to OUTPERFORM (previously, MARKET PERFORM) with an unchanged Target Price of RM1.70 based on our 73% discount to FD RNAV of RM6.32, which we believe is fair given that it is still pegged at below its average historical levels.

Source: Kenanga Research - 29 Sep 2017