Review

• Excluding the unrealized forex gains amounted to RM27.2mn, Selangor Properties Bhd (SPB) reported 1HFY17 normalised net profit of RM27.1mn, which came in at 44% of our full-year earnings forecasts. However, we deem the results in line as 2HFY17 should see stronger progress billings from Aira Residences.

• SPB’s 1HFY17 normalised net profit grew 9.4% YoY to RM27.1mn, underpinned by revenue growth of 5.5% YoY to RM63.1mn. Segmental wise, property investment division PBT increased 25.5% YoY largely due to higher rental income and lower operating expenses. Meanwhile, property development division’s 1HFY17 pretax losses widened to RM7.9mn from RM2.3mn a year ago, largely due to higher marketing and administrative costs in conjunction with the launch of Aira residence.

• QoQ, the group’s 2QFY17 revenue advanced 7.1% to RM32.6mn underpinned by better performance across the board, except property development division. 2QFY17 normalised net profit grew at a slower pace 4.3% QoQ to RM13.9mn, largely attributed to higher marketing and administrative costs incurred for the property development division.

Impact

• Profit forecasts maintained.

Outlook

• Management maintains its internal target of 50% take up rates for the 105 units Aira Residences (GDV: RM850mn) located along Jalan Batai, Damansara Heights, by end 2017. To date, more than 60% of the units have been booked.

• As for the planned re-launch of the Bukit Permata project, management indicates the official launch is expected in 4Q17 or early 2018. Meanwhile, the proposed redevelopment of the group's landbank in Damansara Heights, is in its initial planning stage with considerations on designs which will provide integration and connectivity with the surrounding Mass Rapid Transit project.

• The group’s balance sheet remains solid with net gearing of less than 1%. As such, we believe SPB will still have plenty of room to gear up - for the redevelopment of Wisma Damansara and/or further landbank replenishment.

Valuation

• We maintain our target price of RM5.98/share, based on unchanged FY18 P/B multiple of 0.8x. Maintain Buy.

Source: TA Research - 28 Jun 2017