AMVERTON’s focus for FY19 is to clear unsold units from the Amverton Hill and Amverton Links projects, with FY19 sales target at RM45m. New project is likely to be launched only after FY19 with potential pipelines such as doublestorey terrace units at Amverton Hill and Retirement Village at Amverton Cove. All in, we make no changes to our earnings assumption. Maintain UNDERPERFORM and SoPdriven TP of RM1.00.

Recap of FY18 results. FY18 CNP of RM23.9m came in above expectation with positive variance from its manufacturing and hotel divisions and higher finance income. YoY-Ytd, its FY18 revenue saw decline of 26% due to slow property sales. However, CNP only saw marginal decline at 2%. Positively, its hotel division returned to the black and registered an operating profit of RM2.4m vs. a loss of RM0.2m in FY17. QoQ, its 4Q18 CNP slid 5% due to similar reasons mentioned above, while revenue declined by 41% due to slow property sales and lack of hand-over of completed projects.

FY19’s focus on clearing unsold units. The group is not targeting any new launches for FY19 with their focus currently on clearing existing unsold units at Amverton Hill, Sungai Buloh and Amverton Links, Klang projects. To recap, the group had previously launched 66 units of semidetached and 11 units of bungalows at Amverton Hill. Price range for the semi-detached and bungalows are from RM1.6-2.2m (built-up sizes of 3,370-3,668sf) and RM3.5-4.4m (built-up sizes range 4,516-5355sf), respectively. Response has been average with total take-up rate at c.50%. AMVERTON aims to achieve another RM36.8m in sales from this project and may likely give out more rebates. As for Amverton Links, the group had launched 155 units of double-storey houses in FY17 with a selling price of c.RM700k per unit. Take-up rate had been decent at c.90% and management is targeting another RM8.4m in sales from Amverton Links, bringing total FY19 sales target to RM45.2m.

New projects likely to only come after FY19. The group is more inclined to launch new projects after FY19 given the overall weak property market. Potential projects may include double-storey terrace houses at Amverton Hill and Retirement Village at Amverton Cove, Pulau Carey. For the Retirement Village, it consists of bungalow units targeted towards the elderlies and foreigners. Based on our understanding, AMVERTON is currently in the midst of negotiating with the government for a higher percentage of units to be allocated to foreigners before launching this project. Overall, while we are positive over management’s focus in clearing unsold units, we are concerned over its earnings visibility which is highly dependent on the clearance of its unsold units, coupled with the lack of new launches. Unbilled sales as of 4Q18 are low at only RM28.7m, providing less than half-year of earnings visibility.

Earnings review. All in, we make no changes to our FY19-20E earnings. We are maintaining our conservative sales target of RM40m for FY19, slightly below management’s sales target of RM45.2m.

Maintain UNDERPERFORM with an unchanged SoP-driven Target Price of RM1.00 (property RNAV discount of 88%) implying 83% discount to its SoP/share of RM5.88 (partial GDV and partial land bank basis). Our applied discount of 88%, which is already the steepest in our universe, is due to their slow pace in unlocking the value of their Pulau Carey landbank, which forms the bulk of the valuation.

Risks to our call include: (i) stronger-than-expected margins/property sales, and (ii) positive change in government housing policy

Source: Kenanga Research - 2 May 2019