Maintain NEUTRAL on Developers but look to upgrade to OVERWEIGHT should we see earnings improvements in coming quarter. The KLPRP index took a beating in 3QCY19, registering negative return of 13.5% compared to negative return of 0.9% in 2QCY19, as of our report cut-off date on 20th Sep 2019. The fall is sharper compared to FBMKLCI’s decline of 5% in the same period. For the developers under our coverage, there are no changes to our Target Prices, but upgraded calls for HUAYANG, and MRCB to MARKET PERFORM (from UNDERPERFORM), while SPSETIA, SUNSURIA and UOADEV is upgraded to OUTPERFORM (from MARKET PERFORM) due to the recent sharp retracement in share prices. We particularly like UOADEV for its decent dividend yield of 7%, backed by strong net cash position of RM0.40/share. Our stocks universe’s total sales/earnings trajectories remains unexciting at -13%/+4% YoY in FY19E/FY20E and +4%/+10% YoY in FY20E/FY21E, with wider average RNAV/SoP discount of 66.1% compared to last quarter’s 64.3% (- 1.25SD).

Beaten up. KLPRP index took a beating registering negative return of 13.5% in 3QCY19

compared to 2QCY19’s negative return of 0.9% as of our cut-off on 20 th

Sep 2019. The fall is sharper compared to FBMKLCI’s decline of 5% in the same period. We reckon that the weakening share prices for property stocks were largely due to uninspiring results where we saw 43% of our stock coverage registering results that were below expectations. That aside, property sales for certain developers remain unexciting where we saw revision in their sales targets. For instances, SPSETIA lowered their sales target from RM5.65b to RM4.55b.

Out of 14 developers under our coverage; (i) 43% were below our earnings expectations compared to 36% in 1QCY19 (AMVERTON, LBS, MAGNA, MAHSING, MRCB and SPSETIA) mainly due to timing of billings, and weaker margins from inventory clearing efforts, (ii) 14% surprised positively mainly on better than-expected billings and/or project margins (SIMEPROP, SUNSURIA), and (iii) the rest were within to broadly within expectations. For those that missed expectations, we reduced our FY19E earnings by 11%-

Source: Kenanga Research - 3 Oct 2019