1QFY22 CNP of RM124m come broadly within our/consensus forecast at 20%/18% of full-year estimate as we expect stronger quarters ahead on easier lockdown measures and stronger property sales. 1QFY22 property sales of RM295m is also considered in line with our RM1.9b target (at 16%) as we expect launches at China in 2QFY22/3QFY22 to drive sales. We keep our earnings estimates but upgrade it to OP (from MP) on unchanged TP of RM1.32 given the recent retracement in its share price.

Broadly within expectations. 1QFY22 CNP of RM124m* came broadly within our/consensus expectations at 20%/18% of full-year estimate as 1QFY22 was affected by the FMCO lockdowns which only allowed c.1.5 months of operations during the quarter. Hence, we expect stronger quarters ahead backed by normalised construction progress and higher property sales from China upon new planned launches in 2QFY22/3QFY22. No dividends as expected.

*derived core after stripping of land gain sale of RM86m.

Sales also considered in line. 1QFY22 sales of RM295m (Malaysia: RM198m; China: RM97m) which accounted for 16% of our full-year target of RM1.9b is also considered inline as we anticipate stronger sales in the quarters ahead as explained above

Highlights. QoQ, 1QFY22 CNP of RM124m came off 22% on lower revenue (-34%) as the quarter’s construction progress was impacted by the FMCO lockdowns, and property sales of RM295m during the quarter was also weaker against sales of RM742m in 4QFY21. Likewise, CNP came off 29% YoY due to similar reasons mentioned – harsher lockdowns and stronger sales in 1QFY21 of RM473m.

Earnings forecasts. Post results, maintain FY22E/FY23E earnings post results backed by unchanged sales target of RM1.9b.

Given the retracement in its share price recently, we upgrade it to OP (from MP) with an unchanged TP of RM1.32 based on 0.38x Fwd. PBV pegged to 1.0SD below 5-year mean.

Risks to our call include: (i) weaker-than-expected property sales, (ii) margin compressions, and (iii) unfavourable changes in real estate policies/lending environments.

Source: Kenanga Research - 26 Nov 2021