• Stay NEUTRAL, unchanged TP of MYR0.50 implies -2% total return. Fiamma’s 1Q19 (Sep) revenue improved by 8% YoY to MYR80.1m, on increased revenue from its property business (turnover doubled to MYR12m, vs MYR5.9m in 1Q18). Its mainstay, ie trading & services (TS), which contributed 83% of 1Q19 revenue, recorded a flat topline of MYR66.8m (1Q18: MYR66.7m). PBT improved 19% YoY to MYR11.1m, due to a combination of the TS margin widening to 14.9% from 14% in 1Q18, while its property segment managed to reverse its performance to book a gain of MYR0.4m from 1Q18’s LBT of MYR0.8m – on higher progress billing. Revenue fell 25% QoQ – an expected normalisation – as the TS segment benefitted from a one-off spike in sales when the GST rate was decreased to 0% in the previous quarter. Consequently, PBT dropped 38% QoQ to MYR11.1m from MYR17.8m. No dividend was declared, as expected.

• Update on property projects. For its property division, 1Q19 ended with unbilled sales of MYR48.7m. The bulk of this came from its East Parc, Bandar Menjalara high-rise project, which contributed MYR45.4m to unbilled sales. The balance was accounted for by its smaller landed housing project in Johor. These two projects are expected to be completed by end-2019. Overall take-up rates for its key projects – East Parc, Bandar Menjalara and Vida Heights (GDV: MYR120m) – remain soft, at 31% and 19%. For Vida Heights, which received its certificate of completion and compliance (CCC) in Aug 2017, apart from marketing efforts to sell the remaining stocks, Fiamma is also leasing out some units. On its key pipeline projects, ie land in Jalan Yap Kwan Seng and Jalan Sg Besi, both are still in the planning stage and are not expected to be launched in the near future. The launching of these two projects will depend on the improvement in the take-up rate for the East Parc project.

• We make no changes to our forecasts for now. The stock is trading at FY19F P/BV of 0.5x and P/E of 7.7x, due to the lack of fresh catalysts in the near future and still-low take-up rates for its key property projects. As such, we also hold on to our rating and TP.

Source: RHB Securities Research - 27 Feb 2019