• Stay NEUTRAL, MYR0.52 TP implies a total return of 7%. Fiamma’s full year core net profit of MYR27.7m is in line. While its property take-up rates remain soft, its trading & services segment chalked up a steady performance, providing a buffer for overall financials and credit strength. The potential peaking of its exposure to the property industry in FY20 (Sep) may yield a re rating catalyst, since overall numbers may improve thereon.

• Results in line. FY19 revenue dipped 0.4% to MYR337m, as the stronger property segment (FY19: MYR60m vs FY18: MYR48m) offset the lower contribution from trading & services (FY19: MYR271m vs FY18: MYR285m). FY19 PATAMI declined 14% YoY to MYR27.7m, primarily due to a narrower trading & services PBT (FY19: 13.3% vs FY18: 14.4%). This was expected, as it benefited from the tax holiday in FY18. Management declared a final single-tier DPS of 2 sen.

• Updates on property projects. The property segment sold an additional 30 units in ongoing and completed property projects during the quarter. However, take-up rates for some key projects are still soft. Vida Heights, completed in Aug 2017, had an unchanged QoQ take-up rate at 24% (by units). As for East Parc (in Bandar Menjalara, GDV: MYR320m) 80% was completed, and its take-up rate stood at 43%. For Vida Heights, some of the units have been leased out, generating cash flow to fund carrying costs that include maintenance and finance expenses. Despite the soft take-up rate, funding for its property segment is still well managed, as it is supported by the steady trading and services segment.

• We cut FY20F-21F earnings 14% to reflect the still-soft take-up rates for completed and ongoing projects.

• Maintain NEUTRAL. Despite our negative earnings revision, our TP is unchanged, as the company’s outstanding shares base was reduced on the back of its share buyback exercise.

• Risks to our call. Upside risks are better-than-expected margins for the trading & services unit, and faster-than-expected sales of completed and ongoing property projects. The downside risk: An extended softness in economic growth, which may negatively impact consumer spending.

Source: RHB Securities Research - 28 Nov 2019