INVESTMENT HIGHLIGHTS

• 1HFY18 earnings below estimate

• Weaker earnings in 1HFY18

• Earnings estimates revised downwards

• Maintain Neutral with a revised TP of RM1.07

1HFY18 earnings below estimate. Magna Prima 1HFY18 core net income of RM2.2m came in below expectation, making up only 32% of our full year forecast. The negative deviation could be attributed to the slower-than-expected progress billing and higher-than-expected operating cost. Comparison to consensus estimate is not available due to limited research coverage.

Weaker earnings in 1HFY18. Magna Prima registered core net income of RM1.5m in 2QFY18, bringing cumulative core net income to RM2.2m in 1HFY18. Note that we have excluded unrealised forex gain of RM4.7m in our core net income calculation. 1HFY18 core net income fell 74%yoy due to lower earnings contribution from on-going projects and higher operating cost. In 1HFY18, Magna Prima derived revenue from the sales of remaining completed units of residential project in Jalan Kuching and Desa Mentari commercial project.

Earnings estimates reduced. We reduced our earnings forecasts for FY18/19 by -12%/-39% to account for the lower revenue billing from projects and higher operating cost. We continue to see tepid new sales outlook for Magna Prima as we expect sales momentum from The View Residences (GDV: RM271m) in Shah Alam to be slow.

Maintain Neutral with a revised TP of RM1.07. We revise our TP for Magna Prima to RM1.07 from RM1.18 after assuming lower margin in our RNAV valuation and applying higher RNAV discount of 40% from 35% due to weaker earnings prospect. We maintain our Neutral call on Magna Prima due to its unexciting earnings outlook.

Source: MIDF Research - 17 Aug 2018