INVESTMENT HIGHLIGHTS

• 1QFY19 earnings below expectation

• Dismal earnings in 1QFY19

• Earnings estimates revised downwards

• Maintain Sell with a lower TP of RM0.72

1QFY19 earnings below expectation. Magna Prima was in the red in 1QFY19, registering core net loss of RM5.1m. Note that we have excluded forex gain of RM1.9m in our core net loss calculation. The earnings were below expectation against our core net income estimate of RM2.3m for FY19. The negative deviation is attributed to the weaker-than-expected earnings contribution from its property projects. Comparison to consensus estimates is not available due to limited research coverage.

Dismal earnings in 1QFY19. Magna Prima recorded core net loss of RM5.1m in 1QFY19 against net profit of RM0.6m in 1QFY18. The dismal earnings in 1QFY19 were due to lower sale of service apartments and shop offices in Jalan Kuching residential project. Meanwhile, core net loss narrowed in 1QFY19 compared to core net loss of RM62.8m in the previous quarter as Magna Prima recorded reversal of sale for 24 units service apartment in Jalan Kuching residential project in the previous quarter.

Earnings estimates revised downwards. We revised our FY19/FY20 earnings forecasts by -66%/-23% following the disappointing earnings in 1QFY19. We continue to expect earnings outlook for Magna Prima to be lacklustre due to lack of new launches in FY19.

Maintain Sell with a lower TP of RM0.72. We cut our target price for Magna Prima to RM0.72 from RM0.77 as we widen our RNAV discount to 60% from 57% due to its weak earnings visibility. We maintain our Sell call on Magna Prima due to its dismal earnings outlook which is expected to be dragged by its weak new sales outlook.

Source: MIDF Research - 17 May 2019