FY19 CNP came in within our/consensus estimate at 101%/99%, respectively. FY19 property sales of RM1,630m is above management and our expectations. No dividend declared against our 1.3 sen estimate. Post-results, we maintain our FY20E CNP of RM77m and introduced FY21E CNP of RM81m. No new development with regards to the ZIC Land. Maintain MP with lower TP of RM0.480 (from RM0.520) based on lower P/BV of 0.59x (from 0.67x) which is at the minus 1.5SD level.

Within expectation. FY19 Core Net Profit (CNP) of RM70.7m came in within our/ consensus estimate at 101%/99%of full-year. Besides, FY19 sales of RM1,630m exceeded both management and our target of RM1.5b each. No dividend was declared, which is below our 1.3 sen estimate.

Results’ highlight. YoY, FY19 registered lower CNP of RM70.7m (- 17%) mainly due to: (i) lower contribution from the construction and trading segment caused by softer profit margin from on-going project, and (ii) higher interest cost (+44.6%) compared to FY18, despite the company recording healthy growth of 26% in property revenue. QoQ, 4QFY19 recorded lower CNP of RM17.9m (-15%), dragged by both property and construction revenues due to lower completion of certain projects in current quarter.

Outlook. Management has set a conservative sales target of RM1.6b for FY20 with RM113m achieved as at February 2020. Total planned GDV launch amounted to RM2.321b, mainly from CyberSouth, LBS Alam Perdana, Genting Midhills 2, Emerald Garden 3, Cameron Highlands and Taman Kinding Flora. Besides, unbilled sales of RM2.2b as at December 2019 provide slightly more than a year earnings’ visibility. As for the ZIC Land, there is no major new development, and the company is currently working to improve and revise the upgrading and transformation plan after the Chinese government unveiled the national development plan for Greater Bay Area. The company is targeting to resubmit the plan to the authority in near future.

Earnings review. Post results, we maintain our FY20E CNP of RM77m with sales target of RM1.6b and introduced our FY21E revenue of RM1,565m and CNP of RM81m.

Maintain MARKET PERFORM with lower TP of RM0.480 (from RM0.520). We maintain our conservative P/BV valuation method as a gauge to ascertain the trough valuations of property stocks amid the prevailing market down cycle. Our TP is based on P/BV of 0.59x (at minus 1.5SD of its 3-year historical band) on an adjusted BV/share of RM0.81 (after imputing a 40% discount to its latest available inventory level of completed properties).

Risks to our call include: (i) stronger/weaker-than-expected property sales, (ii) changes in real estate policies, (iii) changes in lending environment, and (iv) positive/negative news development of ZIC Land.

Source: Kenanga Research - 28 Feb 2020