Rebound in 4QFY21 earnings saw FY21 earnings exceeding our expectations. The outperformance was underpinned by better product mix and cost efficiency, lower tax rate and improved performance from associates. With the normalization of business activities, we expect a better FY22 but the Property Management services might see slower improvement given a new rent structure. TP is raised to RM1.70 and we reiterate OUTPERFORM given the recent share price weakness.

Above expectations. 4QFY21 PATAMI of RM71m brought FY21 PATAMI to RM85m accounting for 174%/171% of our/consensus estimates. A DPS of 3.0 sen was declared (in line).

YoY, the extreme FMCO dragged top-line to RM3.63bn (-10%). Both Retailing and Property segments declined by 10% and 12%, respectively, to RM3.10b and 531.3m on account of prolonged closure of stores (retailing) and revamp in the rental structure. EBITDA margin improved by 2ppt to 20.0% on product mix and cost efficiency as opex fell 11%. PATAMI ended at RM85.3m (>100%) on account of lower ETR and lower finance costs.

QoQ, top-line ended at RM992.1m (+32%) underpinned by both Retail (+35% to RM854.3m) and Property Management (+17% to RM137.9m). Retail was boosted by ease of restrictions, festive season and year-end sales. Property Management was underscored by higher sales commission and temporary space rental received. PATAMI rebounded to RM71.0m on of higher revenue and lower ETR of 25%.

Normalization ahead. We expect a better FY22 ahead given the normalization of business activities, underpinned by the pent-up demand and incoming festivities. The opening of interstate travel has seen higher volume of traffic in both the Northern and Southern regions (>100% vs. FY19). Better product mix (or higher food line composition) especially in Malay-centric areas are seeing fruit as retail footfalls recover from the lockdown.

Post results, we revised our FY22E earnings upwards by 11% to RM113m on account of better performance from associates and introduce our FY23E earnings.

OUTPERFORM maintained. Our TP is raised to RM1.70 (from RM1.60) pegged to its 5-year mean of 21x (implying a 0.5SD below mean), which we feel is justified given its new rent structure which would likely result in a slower momentum in revenue. As the stock has seen weakness in recent weeks, we reiterate our OUTPERFORM call.

Risks to our call include: (i) lower-than-expected sales, and (ii) higher-than-expected operating expenses, iii) new variants of the pandemic.

Source: Kenanga Research - 24 Feb 2022