1HFY16 net profit of MYR38.1m was slightly below our expectations, at 17.6% of our full-year estimate. This was mainly due to lower share of profit from its associate and higher administrative expenses. Maintain BUY with a lower TP of MYR4.06 (from MYR4.77, 34% upside), pegged to a lower FY16F P/E of 9.5x (from 10.5x) in view of the weak sentiment for property stocks. SHL declared a first interim dividend of 7 sen.

Slightly below expectations. SHL Consolidated’s (SHL) 1HFY16 (Mar) results were slightly below our expectations, with net profit of MYR38.1m (+2.3% YoY) accounting for 17.6% of our full-year estimates against our expectations of 20-25%. This was mainly due to lower share of profit from its associate and higher administrative expenses vs our estimates. 2QFY16 net profit increased by 3.8% QoQ to MYR19.4m despite lower revenue of MYR60.5m (-2.6% QoQ), mainly attributed to higher interest income and share of profit from its associate in 2QFY16. Meanwhile, SHL’s new project Alam Budiman Affordable Home in Shah Alam has received good response from buyers. We expect this to contribute to its bottomline over the next few quarters.

Forecasts and risks. We revise our earnings forecasts downwards by 5.9%/0.3%/11.3% for FY16/FY17/FY18 respectively, mainly to reflect higher operating expenses and lower share of profit from associate. Key risks to our forecasts include lower-than-expected take-up rates and higher-than-expected property development expenses.

Declared 7 sen first interim dividend. SHL has declared a first interim single-tier dividend of 7 sen for FY16 (FY15: 7 sen). This represents an interim dividend yield of 2.3%.

Maintain BUY with a lower TP of MYR4.06. We maintain our BUY recommendation with a lower TP of MYR4.06 (from MYR4.77, 34% upside) pegged to a lower FY16F P/E of 9.5x (from 10.5x), in view of the weak market sentiment for property stocks. We continue to like SHL given its prudent management, strong balance sheet strength and attractive dividend yield. As of September, its total net cash stood at MYR239.9m (or MYR0.99 per share). This implies ex-cash FY16F P/E of 7.2x based on our TP

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

SHL Consolidated Bhd is mainly involved in property development, granite quarrying and clay bricks manufacturing.

Recommendation Chart

Source: RHB Research - 26 Nov 2015