1Q20 Revenue improve marginally but earnings wiped out by higher expenses and lower investment revenue

Plenitude 1Q20 reported revenue of RM45.8m (yoy:+7.3%, qoq:-49.1%) and PATMI of RM1.1m (yoy:-85.9%. qoq:-93.8%). While revenue largely in line with our estimate, earnings disappoint due to lower operating profit margin and investment revenue.

Property weak sentiment continue

Property division revenue of RM25.5m is within our expectation however operating profit fell drastically to RM6.5m (yoy-11.6%, qoq:-80.9%), operating margin fell substantially to 25.6% (1Q19:30.7%, 4Q19:45.4%). In view of the weak sentiment in property industry, the Group will continue to adopt cautious approach in new property launches and continue to intensify its marketing and sales initiatives to promote its existing properties.

Hotel operations division remain challenging

Hotel operations registered better revenue of RM20.3m (yoy:+8.6%, qoq:+39.0%) as newly-acquired hotel in Seoul contributed RM4.2 million of revenue for the current quarter while revenue from hotel operations in Malaysia registered a drop of RM2.6 million. The lower revenue in Malaysia were partly due to haze spell from Aug’19 to Oct’19 and on-going renovation at Novotel KL. Malaysia hotel yield remain depress in an increasingly competitive market.

Maintain BUY with unchanged TP of RM2.77

Despite the challenging outlook, We continue favor Plenitude for its strong balance sheet, consistent dividend, strategic landbank in mature township and recurring income from its hotel operations. We maintained BUY recommendation with unchanged target price of RM2.77 based on P/B ratio of 0.66x of our estimate FY20F NTA.

Source: Mercury Research - 2 Dec 2019