INVESTMENT HIGHLIGHTS

• FY18 earnings below expectation

• Earnings in the red due to reversal of property sale

• Earnings estimate revised lower

• Maintain Sell with an unchanged TP of RM0.77

FY18 earnings below expectation. Magna Prima sunk into the red in FY18 after recording core net loss of RM62.8m. The earnings performance was below expectation against our core net income estimates of RM3.8m. The negative deviation is attributed to the surprise net loss in 4QFY18 which were due to reversal of property sale. Comparison to consensus estimates is not available due to limited research coverage.

Earnings in the red due to reversal of property sale. Magna Prima recorded core net loss of RM69.7m in 4QFY18, bringing cumulative core net loss to RM62.8m in FY18. Note that we have excluded fair value adjustments on investment properties and unrealised forex gain in our core net income calculations. The dismal earnings in FY18 were due to unsuccessful sale of 24 units service apartments in Jalan Kuching residential project which was recorded in FY17. Meanwhile, revenue was contributed by sale of remaining completed units.

Earnings estimate revised lower. We cut our FY19 earnings forecast by 30% following the disappointing earnings in FY18. We also introduce our earnings forecast for FY20. We continue to expect earnings outlook for Magna Prima to be lacklustre due to lack of new launches and weak sales momentum from The View Residences in Shah Alam.

Maintain Sell with an unchanged TP of RM0.77. We maintain our TP for Magna Prima at RM0.77, based on 57% discount to RNAV. Maintain Sell on Magna Prima due to lacklustre earnings. The weak new sales outlook is also expected to continue drag its earnings in the near-term.

Source: MIDF Research - 1 Mar 2019