1QFY21 CNP of RM174m came within our and consensus estimates at 25% and 30%, respectively. Sales are also well within at 25% of our RM1.9b target. The outlook remains cautiously optimistic given the fluidity of the Covid-19 pandemic but we take comfort in its geographical diversification. Maintain FY21-22E CNP of RM683-691m and MARKET PERFORM call, with an unchanged TP of RM0.97 based on 0.28x PBV.

Within expectations. 1QFY21 CNP of RM174.2m came well within our and consensus expectations at 25% and 30%, respectively. 1QFY21 sales of RM473m is also well within our FY21E sales target of RM1.9b at 25%, of which China contributed the bulk at 51% while Malaysia contributed 49%. No dividend, as expected.

Results’ highlights. YoY, top-line was up by 22% on stronger sales recognitions from Malaysia and China, while CNP was down by 8% on: (i) higher administrative expense (+33%), and (ii) lower interest income (-47%) and (iii) lower JV contribution. QoQ, top-line growth of 8% was due to similar reasons mentioned above. However, bottom-line was only up by 1% likely due to lower-margin products during the quarter as GP margin declined by 8ppt.

Outlook. For the upcoming two years, its property investment would add on 3.4m sf (+58%) of NLA while its hospitality division would add on 865 keys (+46%). While Covid-19 poses uncertainties for now, we feel the situation would eventually normalise and these assets would strengthen the Group’s recurring income base. Unbilled sales stood at RM563m which provides <1 year of visibility.

Maintain FY21-22E CNP of RM683-691m backed by our unchanged FY21-22 sales target of RM1.9b each. At this point, management is not guiding on targeted sales given the fluidity of the Covid-19 pandemic. As such, we will continue to monitor the situation closely and remain cautiously optimistic for now given that sales momentum and revenue recognition have been above average, in contrast to other developers in light of the MCO lockdowns.

Maintain MARKET PERFORM with unchanged TP of RM0.97 based on 0.28x PBV (-1.5SD below 5-year mean). We remain conservative on our valuations for now and take cue from management given the fluidity of the situation, but take comfort in the Group’s well-located assets and geographical diversification injecting resilience to its earnings profile.

Risks to our call include: (i) weaker-than-expected property sales arising from a prolonged US-China trade war and Covid-19 pandemic, (ii) margin compressions, (iii) changes in real estate policies/lending environments, and (iv) M&A/privatisation/cash-calls.

Source: Kenanga Research - 26 Nov 2020