Maintain NEUTRAL with slightly lower TP of MYR0.50 from MYR0.51, for expected total return of 2%. Fiamma’s FY18 PATAMI of MYR32.6m was 17% higher than our full year estimate, as its T&S segment received a strong one-off boost in the final quarter. This was due to stronger demand due to the tax holiday during the September reporting quarter. Moving forward, we are expecting this to normalise. On its property segment, overall new sales are still slow, with East Parc, KL seeing take-up rate rise 1pt QoQ to 31%; while Vida Heights, JB stayed flat at 17%. For East Parc, some progress has been made over the past two months, which may translate into new sales. Meanwhile, for Vida Heights, of the 202 unsold units, 40 have been leased out. Post results, we cut our FY19F-20F earnings by 13% and 14% to reflect the slower new property sales.

Trading & services (T&S) segment saw a big 4Q jump. FY18 (Sep) revenue improved by 7.4% to MYR339m – both T&S and property segments saw improvement of 4.8% (MYR285m) and 26.8% (MYR48m). The T&S segment overshot our full year forecast organic growth rate of 1.5%, as it benefitted from the strong 4Q, which coincided with the tax holiday period (4Q is also a traditionally a better quarter).

PATAMI for the full year improved by 44.8% (MYR32.6m), on stronger topline as well as better margins, particularly its T&S segment (FY18 PBT: MYR41m, FY17: MYR29m), which saw PBT margin improving by 374 bps to 14.4% vs the previous year’s 10.6%. Management indicated that this was partly due to better cost management. Its property segment also saw improvement, posting PBT posted of MYR4.3m vs MYR3.7m in FY17, mainly due to contribution from East Parc (GDV: MYR320m). The lower effective tax rate of 24.2% vs 28.6% also aided the bottomline. A final single-tier dividend of MYR0.025 was proposed.

QoQ, revenue improved by 29% to MYR107m, as T&S posted a 15% improvement on the reason cited above, while the property segment also saw higher booking of progress billing (MYR23m, from MYR10m in 3Q). PBT margin for the T&S segment also improved to 16.2% from 14.1% in the previous quarter. Consequently, PATAMI improved by 54% to MYR12.2m.

Earnings downgrade. We cut FY19F-20F earnings by 13% and 14% largely to reflect the slow new sales of its property segment, while we are expecting its T&S segment’s performance to normalise.

Maintained NEUTRAL with lower SOP TP of MYR0.50.

Source: RHB Securities Research - 29 Nov 2018