Review

• Excluding the unrealised forex gains amounted to RM28.7mn, Selangor Properties Bhd (SPB) reported 9MFY17 normalised net profit of RM45.1mn. Results came within ours but above consensus, accounting for 74% and 84% of ours and consensus full-year estimates.

• SPB’s 9MFY17 normalised net profit grew 29.9% YoY to RM27.1mn, underpinned by a revenue growth of 10.4% YoY to RM94.9mn. Segmental wise, Australian operation reported strong PBT growth of 49.7% YoY, driven by higher rental income achieved and a favourable exchange rate. Property investment division PBT increased marginally by 0.6% YoY largely due to lower operating expenses. Meanwhile, property development division’s 9MFY17 pretax losses widened to RM11.1mn from RM7.9mn a year ago, largely due to higher marketing and administrative costs in conjunction with the launch of Aira residence.

• QoQ, the group’s 3QFY17 normalised net profit grew 29.9% to RM18.0mn, largely due to lower effective tax rate (-3.5%-pts QoQ). Meanwhile, property development division also contributed to the improvement, as the division’s pretax losses narrowed to RM3.2mn in 3QFY17 from RM4.7mn a quarter ago, on lower staff costs and operating expenses.

Impact

• No change to our earnings estimates.

Outlook

• With more than 60% of the 105 units of Aira Residences (GDV: RM850mn) have been booked to date, management is confident in meeting its internal sales target of 50% by end 2017.

• As for the planned re-launch of the Bukit Permata project, management maintains that the official launch will be in 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. Specifically, we understand that preliminary planning works for Wisma Damansara site has commenced and we have assumed the official launch of the site in 2 years’ time (FY19).

• Based on the latest quarterly results, the group is in a net cash position. As such, we believe there is plenty of room for SPB to gear up further - for the redevelopment of Wisma Damansara and/or other landbank replenishment.

Valuation

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

Source: TA Research - 27 Sept 2017