MK Land ended FY14 with RM29.9m (+107.6% YoY, +90.4% QoQ), which was lifted by deferred tax reversal and gains from disposal of an investment property, which we believe was the 9.6-acre land in Damansara Perdana. Ex-the tax reversal gain, the core profit of c.RM54m (+34% YoY) was within expectations, as we have indicted in our earlier report that the final quarter to be strong, underpinned by existing unbilled sales and gains from the land sale announced last year.

New projects to be unveiled include 2 condominium projects in Damansara Damai and another two in Damansara Perdana. As indicated earlier, MK Land is hopeful to unveil the mid-range condominium projects (16 acres) at Damansara Damai by mid-CY2015, which are then followed by the condominium projects (20 acres) at Damansara Perdana. Meanwhile, near term earnings will be driven by selling the remaining semi-D units at Rafflesia (c.200 units remaining valued at RM700m). With Metropolitan Sq condos almost sold out, and the remaining unsold units comprising mostly Rafflesia semi-Ds which are slow moving, the timing of the project launches is essential to maintain its earnings.

Non-core land for disposal. We understand MK Land is still planning to dispose non-strategic assets and the next asset to be sold is the Setiawangsa land valued at c.RM96m. We understand that the sale is taking longer than expected because approvals for the land have lapsed and MK Land wants to sell the land outright without securing new approvals. Unless the land disposal happens, we believe earnings will be slower in the next FY.

Maintain Outperform and TP of RM0.80 or c.50% discount of its RNAV estimate of RM1.67. The next catalyst in our view will come from launching more projects, especially at their crown jewel, Damansara Perdana to maximize returns from the Group‟s prime landbank. Balance sheet is also strong, with net cash of c.RM100m now.

Source: PublicInvest Research - 29 Aug 2014