Review

• Sentoria’s FY16 headline net profit grew 3.0% YoY to RM33.1mn. Excluding the fair value gain on investment properties, which amounted to RM5.8mn, FY16 normalised net profit advanced 11% YoY to RM28.8mn. Results came in within expectations at 103% of our full-year earnings forecast.

• No dividend was declared during the quarter under review. However, we expect the board to propose a final dividend of 2sen/share in Jan-17, which will be subjected to approval in an AGM to be held in Mar-17. This has been the practice of the group since listing in 2012.

• YoY, FY16 normalised net profit increased 11% YoY to RM28.8mn, on the back of 2.1% growth in revenue. Property development division’s revenue and EBIT increased 7.2% and 4.1% respectively in FY16. Better performance was driven by higher progress billings from development projects in Kuching and Morib, which were launched in Sep-15 and early 2016 respectively.

• The leisure division’s EBIT improved to RM2.5mn in FY16 from a loss of RM3.2mn a year ago. We attribute the improvement to the group’s on-going cost rationalisation measures.

• On a QoQ basis, the group recorded a normalised net profit of RM11.6mn in 4QFY16, more than double from a profit of RM4.7mn in 3Q. The stronger sequential profit was largely underpinned by higher progress billing recognised from developments in Kuching and Morib and a turnaround in the leisure division.

• The group recorded RM228.5mn in new property sales in FY16. This represents an encouraging YoY growth of 141%. Its two new resort cities, namely Borneo Samariang Resort City (BSRC) and Sentoria Morib Resort City (SMRC) are the key contributors to sales. Unbilled sales increased to RM175mn as at Sep-16 from RM150mn a quarter ago. Meanwhile, the group clinched RM137.4mn worth of design and build contracts in FY16 and the outstanding orderbook from these contracts stood at RM118.7mn as at Sep- 16

Impact

• Maintained.

Outlook

• The group will continue focusing on building affordable homes in its key operating areas such as Kuantan, Kuching and Klang Valley. In addition, the group will also actively bid for contracts to build PR1MA homes. Recall, the group has clinched two construction contracts totaling RM110mn in Mar-16, for the design and build of affordable homes in Kuantan and Sepang.

• FY17 and FY18 earnings are expected to be substantially stronger, driven by: 1) target sales of RM1.05bn over FY16-18, and 2) three upcoming theme parks, scheduled for opening over the next 3 years.

Valuation

• No change to our target price of RM0.84/share at this juncture, based on unchanged 8x CY17 EPS. We place our recommendation on Sentoria under review, pending the analyst briefing to be held on Thursday (1 Dec).

Source: TA Research - 30 Nov 2016