Period 2Q13 /
1H13
Actual vs. Expectations 1H13 core earnings of RM11.6m were above our expectations,
accounting for 78% of our estimates. This was due to quicker than expected sales
of the already completed Gurney Paragon Condo (GPC) sales (95% take-up) and
Bandar Putra Bertam (BPB Phase 3; 77% take-up). In fact, 1H13 sales of RM53m
(+3% YoY) are proportionately ahead of our full FY13E sales target of RM83m.
Dividends None, as
expected.
Key Results Highlights YoY, 1H13 core net profit and revenue fell 19%
each on lower property sales and billings given that there are no other major
new launches other than its on-going BPB project.
QoQ, 2Q13 pretax profit dipped 25% to RM7.6m although
its topline grew 14% to RM30.7m. EBITDA margins were compressed by 13.1ppt to 29.8%
due to higher cost arising from GP Mall commencement and lower development
margins from BPB Phase 3.
Outlook Over FY13, we believe the group will continue
to focus on completing its GP Mall works and may hold back sizeable project
launches (e.g. Alila 2, Bayan Baru). GP Mall should commence in Jul-13 and we
expect the mall to be 75% occupied upon commencement. The mall has attracted
the likes of Valiram Group franchising (NST reported that 10 big names like
Michael Kors, Swiss Watch Gallery), Padini Concept Stores, TGV Cinemas and
more.
We believe the group will eventually inject
the mall into a REIT since retail M-REITs have fared well over the last 5
years; however, the mall will take a minimum of 3 years to mature.
Change to Forecasts We raise FY13-14E core earnings
by 11%-29% on quicker sales of GP Condo and BPB P3.
Unbilled
sales of RM16m provide <1 year visibility.
Rating Maintain
UNDERPERFORM
The stock is trading at trough 0.5x Fwd PBV
but upside to our TP is limited at this juncture given declining profit trends
and lack of near term sizeable new launches.
Valuation Maintain TP of RM1.50 on 53%* discount to our FD
SoP RNAV of RM3.20.
Risks Sector
risks, including negative policies.
Source: Kenanga
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