What’s New

Weak 4QFY18. Land & General (L&G) reported a 4QFY18 core net profit of RM2.8m, after stripping out one-off writebacks of RM17.8m. This takes FY18 core loss to RM2.8m which is below our expectation as we had over-estimated the progress billings from its Astoria project in 2HFY18. Also, it was dragged by RM3.3m share of losses from its 45%- owned Country Garden Properties (M) Sdn Bhd during 4QFY18.

Decent property sales. L&G achieved RM120m property sales (+8% y-o-y) in FY18, largely due to its ongoing Astoria project in Ampang. Therefore, unbilled sales stood at RM175m which will underpin its earnings visibility in the near term.

Higher-than-expected dividends. Despite the weak results, L&G declared a higher-than-expected final DPS of 1.5 sen which translates into a whopping dividend yield of 8.8%. Its strong balance sheet with RM201m net cash (7 sen/share) will allow the company to continue to reward its shareholders, in line with its practice for the past few years.

Banking on new launches. L&G has recently launched the second phase of Damansara Foresta called Damansara Seresta (RM480m GDV) in Mar 2018. A strong sales performance from the project could help deliver impressive earnings growth given its small earnings base.

We cut FY19-20F earnings by 22%/17% to account for the delays for its new launches, as a recovery in the property market remains elusive. Therefore, we also revise down our TP to RM0.24, based on a wider 70% discount to our RNAV. Nevertheless, we retain our BUY rating in view of the unjustifiably steep discount of 79% to its RNAV, as well as its attractive dividend yield of 8.8%.

Source: Alliance Research - 1 Jun 2018