FY19 CNP of RM5.1m came in above our estimate (130%) but spot on consensus. The deviation was mainly due to stronger-than-expected property sales. No dividend was declared as expected. We maintain our FY20E earnings of RM5.1m and introduce FY21E revenue of RM82.7m and CNP of RM6.1m. Upgrade to MARKET PERFORM and increase our TP to the offer price of RM1.20 (from RM0.890) in view of the likely completion of the take-over exercise.

Above our expectation. FY19 CNP of RM5.1m came in above our estimate (130%) but spot on consensus’ expectation. The deviation was mainly due to stronger-than-expected property sales. No dividend was declared, as expected.

Results’ highlights. YoY, FY19 CNP dropped to RM5.1m (-79%) compared to RM23.9m in FY18, mainly due to significant decrease in contribution from property development segment caused by less development activities as the company did not launch any new project due to the softer market condition. QoQ, 4QFY19 CNP surged to RM2.2m compared to RM0.3m in the preceding quarter, largely due to higher sales generated in the current quarter and better performance at the hotel segment.

Outlook. The group is not targeting any new launches with their focus currently on clearing existing unsold units at Amverton Hill, Sungai Buloh (semi-detached and bungalow units) and Amverton Links, Klang (double-storey houses). The group is more inclined to only launch new projects upon indications of market recovery. Besides, performance of hotel segment could be affected by the Covid-19 outbreak.

Earnings review. Post results, we maintain our FY20E earnings of RM5.1m in view of the softer property market demand and slower economic growth. Besides, we introduced FY21E revenue of RM82.7m and CNP of RM6.1m.

Corporate exercise. The company has on 13 January 2020 received a notice of unconditional voluntary take-over offer, to acquire all the remaining shares in Amverton not already held by Dalta Industries Sdn Bhd (“Offeror”) and Tan Sri Dato’ Ir Ng Boon Thong @ Ng Thian Hock (“Ultimate Offeror”) at the offer price of RM1.20. We think the offer price is a good exit point for short-term investors as it provides 35% upside (based on our previous TP of RM0.890) amid a challenging property market. However, in the longer run, the offer price may be seen as undervalued (vis-à-vis its latest BV per share of RM1.97) as the current depressed valuation could get a lift when the property market recovers eventually.

However, based on the latest announcement, the Offeror, Ultimate Offeror and PACs collectively hold 93.19% of the total shares (from 85.54% on the notice date), hence we think the take-over is likely to go through. As such, we raise our Target Price to RM1.20 (from RM0.890) and upgrade our call to MARKET PERFORM.

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

Source: Kenanga Research - 28 Feb 2020