1Q18 CNP of RM3.2m is within expectations, making up 27% each of our and consensus full-year estimates. The 0.85 sen dividend declared is in line with our full-year expectation of 1.1 sen. No changes to FY18-19E earnings. Maintain UNDERPERFORM with an unchanged Target Price of 0.995.

Within expectations. 1Q18 CNP of RM3.2m came in within expectations, accounting for 27% of our and consensus full-year expectations. The 0.85 sen dividend declared is also within our full-year expectation of 1.1 sen.

Results highlight. MAGNA registered 1Q18 CNP of RM3.2m compared to CNL of RM1.4m in 1Q17 largely driven by improvement in revenue, which increased by 34%. The growth in revenue was mainly driven by its projects, i.e. "Desa Mentari" commercial project and Jalan Kuching project. QoQ, 1Q18 CNP declined 34% despite revenue growth of 24%, mainly due to lower positive tax recorded (-65%) compared to 4Q17.

Outlook. We believe that its longer-term earnings should be supported by its Shah Alam and Kepong projects, coupled with existing inventory of c.RM200.0m in Boulevard Business Park, Jalan Kuching and Desa Mentari, Jalan Kelang Lama projects. That said, we also believe that earnings could be boosted should MAGNA be able to monetize its 2.6 acres of land along Jalan Ampang valued at c.RM400m, which we have not yet imputed into our estimates.

Earnings unchanged. Post results, there are no changes to our FY18- 19E CNP.

Maintain UNDERPERFORM, with an unchanged Target Price of RM0.995. Our FD RNAV per share of RM2.94 is driven by 11% WACC, 15% net margin for planned RM2.5b GDV, RM48.0m unbilled sales, and full warrants conversion. Our applied discount of 67% is in line with the average RNAV discount of 68% ascribed for the sector.

Risks to our call include: higher-than-expected margins/property sales, lower-than-expected administrative costs, positive real estate policies, and decent lending environment.

Source: Kenanga Research - 18 May 2018