1H19 CNP of RM185m came in within expectations, at 53% and 50% of ours and consensus, respectively. 1H19 sales of RM318m are also deemed broadly in-line as sales and launches are usually back loaded to 2H. No dividend, as expected. The group has lined up c.RM1.3b worth of new launches for FY19 whilst continuing its inventory clearing efforts. No changes to earnings. Maintain MARKET PERFORM with an unchanged TP of RM2.15.

Within expectations. 1H19 CNP of RM185m is well within our and consensus expectations at 53% and 50%, respectively. Meanwhile, 1H19 sales of RM318m are also deemed broadly within our full-year estimate of RM1.32b (24%) due to timing of the bulk of their new launches, which will commence in 2H19. 1H19 sales were driven by South Link Lifestyle Apartments, Sentul Point Suite Apartments, Desa Green and United Point Residence. No dividends, as expected.

Results’ highlights. QoQ, CNP more than doubled (+109%) as top line grew by 41% on higher contributions from Sentul Point Suite Apartments and United Point Residence, which basically trickled straight to bottom-line. YoY-Ytd, top-line was up by 23% on recognitions from United Point Residence, Sentul Point Suite Apartments, and South Link Lifestyle Apartments, while increased finance income (+13%) and a marginally lower effective tax rate (- 0.8ppt), resulted in CNP increasing by 23%. The group remain in a strong net cash position.

Outlook. Upcoming new launches worth GDV of RM1.29b are; (i) Goodwood Residence@ Bangsar South (GDV RM600m) which received APDL in May, with a targeted launch by 3Q19, (ii) Aspen Green Residence @ Sri Petaling (GDV of RM1b but will only be launching RM250m worth this year) which has not yet received APDL with targeted launch in 2H19, (iii) Bandar Tun Razak, Cheras (GDV RM300m) which has started construction and may be operator-run, and (iv) UOA Business Park Phase II (RM140m) of which the group will start construction first. The remaining part of the year will be driven by on going projects and inventory clearing efforts.

Maintain CNP of RM348-351m in FY19-20. Unbilled sales of RM1.17b provide slightly more than 1-year visibility.

Maintain MARKET PERFORM with an unchanged TP of RM2.15 based on RNAV discount of 50% @ -1.0SD to its FD RNAV of RM4.31. Our applied discount level is at the better end of our universe’s range (- 2.0SD to -1.0SD). We think our valuation level is fair considering the challenging property sector landscape and its defensive attributes such as: (i) pure KL exposure with connectivity plays, (ii) high margins, (iii) net cash position, and (iv) more prominent recurring income streams from its hospitality and property investment assets. Even though the Group has more defensive attributes than other developers, it is still considered slightly riskier than MREITs and thus, our TP implies 6.5% yield which we believe offers a fair premium over sizeable MREITs (with net yield of 4.9%).

Risks include weaker/stronger-than-expected property sales, margin fluctuations, and changes in real estate policies and/or lending environments.

Source: Kenanga Research - 27 Aug 2019