INVESTMENT HIGHLIGHTS

• The View Residences sales slower than expected

• Tepid new sales outlook

• Earnings forecast reduced

• Downgrade to Neutral with a revised TP of RM1.23

The View Residences sales slower than expected. Magna Prima launched The View Residences (GDV: RM271m) in 3QFY17. The View Residences is a residential condominium on 5.25 acres of leasehold land in Sultan Abdul Aziz Shah Golf Club, Shah Alam. The View Residences comprises three 15-storey towers that house 315 condominiums. First tower of The View Residences was launched in mid-September 2017 while take-up rate is slower than expected (estimated at ~40%) while tower three is yet to be launched.

Tepid new sales outlook. Magna Prima recorded new sales of RM105m in FY17, mainly contributed by Boulevard Business Park project in Jalan Kuching and Desa Mentari project in Old Klang Road. Meanwhile, new property sales outlook for FY18 is tepid due to the slower-than-expected sales of The View Residences. On the other hand, we gather that planned launches for FY18 include Kepong 2D project with GDV of RM156m. Note that Kepong 2D is located in Metro Prima Kepong which is a 89 acres township project.

Earnings forecast reduced. We cut our earnings forecast for FY18/19 by 39.3%/35.3% after assuming lower sales achieved for FY18/19. Earnings in FY18 are expected to be mainly contributed by Boulevard Business Park and Desa Mentari. Unbilled sales of RM40m provide earnings visibility of less than one year.

Downgrade to Neutral with a revised TP of RM1.23. Corresponding to our earnings revision, we revised our target price for Magna Prima to RM1.23 from RM1.59. Our TP is based on 35% discount to fully-diluted RNAV. We widened our discount to RNAV to 35% from 20% due to slower than expected sales from The View Residences and tepid new sales outlook in the near term. Our call on Magna Prima is revised to Neutral from Buy.

Source: MIDF Research - 22 Mar 2018