Ho Hup’s 1H15 earnings of MYR34.3m were largely in line with our and consensus expectations, making up 49% of our/consensus full-year forecasts. We make no changes to our earnings forecasts. Maintain BUY with a lower SOP-derived TP of MYR1.77 (92% upside, fully-diluted TP: MYR1.48) as we apply a higher discount rate to its RNAV in light of a weak property market sentiment.

Largely in line with expectations. Ho Hup Construction’s (Ho Hup)1HFY15 revenue of MYR149.6m declined 12.5% YoY, mainly attributable to lower contribution from its construction division (-24% YoY) – Kem Askar Johor and Karbala Project in Iraq reached completion stages during 2Q15. However, net earnings of MYR34.3m (+20.1% YoY) was largely in line with our and consensus expectations, making up 48.9%/48% of our/consensus full-year forecast. The improved earnings is mainly lifted by greater contribution from its Bukit Jalil’s Parcel A project and Phase 1 of its JV project with Pioneer Haven /B, and prtly because its construction segment only contributes marginally to its bottom line.

Performance remains intact. Phase 2B(i) under the JV project (comprises of two blocks of serviced apartments) launched in J une has been fully booked while Phase 2B(ii) (another two blocks of serviced apartments) launched in July (previously targeted launch in 4Q15) has also received good response from buyers. These two phases, once fully sold, are estimated to add about MYR169m on top of Ho Hup’s total unbilled sales of MYR546.5m as of May, providing good earnings visibility for the next two-three years.

Earnings forecasts. We make no changes to our earnings forecasts for now. Key risks include: i) weaker-than-expected take-up rates for its property development projects, and ii) failure to replenish its orderbook.

Maintain BUY with a revised SOP-derived TP of MYR1.77 (fullydiluted TP: MYR1.48). We trimmed our TP to MYR1.77 (from MYR1.96, 92.4%) based on SOP valuation, after applying a higher discount rate of 35% (from 25%) to its property development’s RNAV to reflect a higher market risk premium on the local property sector. Maintain BUY.