INVESTMENT HIGHLIGHTS

• 1QFY18 earnings below expectation

• Lower earnings in 1QFY18

• Earnings estimates reduced

• Tepid new sales outlook

• Maintain Neutral with a revised TP of RM1.18

1QFY18 earnings below expectation. Magna Prima 1QFY18 core net income of RM0.6m came in below expectation, making up 5% of our estimates. The negative deviation could be attributed to the slower-than-expected progress billing and lower-than-expected margin in 1QFY18. Comparison to consensus estimates is not available due to limited research coverage.

Lower earnings in 1QFY18. Magna Prima registered lower core net income of RM0.6m (-71%yoy) in 1QFY18 despite revenue grew 34%yoy, owing to higher cost of sales. Note that we have excluded forex gain of RM2.6m in our 1QFY18 core net income calculation. 1QFY18 earnings of Magna Prima were mainly contributed by sales of remaining completed units of residential project in Jalan Kuching and Desa Mentari commercial project.

Earnings estimates reduced. We reduced our earnings forecast for FY18/19 by 42%/39% to account for the slower progress billing and lower margin. New sales outlook for Magna Prima is tepid as we expect sales momentum from The View Residences (GDV: RM271m) to be slow. Meanwhile, 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.

Maintain Neutral with a revised TP of RM1.18. We revise our TP for Magna Prima to RM1.18 from RM1.23 as we assume lower margin in our RNAV valuation. Our TP is based on unchanged 35% discount to fully-diluted RNAV. We maintain our Neutral call on Magna Prima due to its unexciting earnings outlook.

Source: MIDF Research - 18 May 2018