Maintain NEUTRAL call with higher TP of MYR0.51 from MYR0.49, 0% upside, as we roll over our valuation to FY19. Fiamma’s 9MFY18 PATAMI of MYR20.3m accounted for 73% of our FY18 full-year forecast, which we deem to be in line. Its performance was partly assisted by the normalisation of provision for bad debt and inventory adjustments. No interim dividend was declared. The property segment remains soft with take-up rates for key projects – East Parc, KL and Vida Heights, JB – still at low levels. Post results, we are maintaining our forecasts. While the reintroduction of SST will likely have some impact on selling prices for certain home appliances under its trading and services segment, its net impact is not expected to be significant, in our view.

Meeting expectations. YoY, 9MFY18 total revenue increased at an organic rate of 3% to MYR232m, as all business segments posted better numbers. The trading and services segment, which contributed 87% of total revenue, saw a growth of 2% to MYR203m. The property segment is still experiencing slow take-up rates for its key projects (by GDV, take-up rate as of end Jun 2018 for East Parc was at 30% while Vida Heights was at 17%) and contributed MYR25m vs MYR23m previously.

At the PBT level, 9MFY18’s performance improved by c.29% to MYR29m. The better performance was largely driven by the normalisation in provision of bad debts for its trading and services segment – it experienced a one-off significant bad debt write-off of MYR2.2m in 9MFY17. The property arm saw a contraction in PBT to MYR0.2m from MYR2.3m, due to higher operating expenses incurred.

QoQ performance driven by trading and services. QoQ, revenue improved by 9% to MYR83m. The bulk of the improvement came from the trading and services segment, which registered revenue of MYR72m vs MYR64m in 2Q, with the tax holiday believed to have partly contributed to the better performance.

Maintain NEUTRAL with revised TP of MYR0.51. We roll over our valuation to FY19, and our SOP-based TP has been revised to MYR0.51 from MYR0.49.

Key risks to our call include waning consumer confidence in Malaysia, the MYR weakening against the USD and CNY, and a delay in the recovery of the property market.

Source: RHB Securities Research - 21 Aug 2018