Amcorp Properties APRO MK Sector: Properties

Transcription

1 Delays and uncertainty Amprop will suffer a completion delay for a major London project leading us to cut its FY17E earnings by 28%. Although this event is merely a timing issue, Brexit on the other hand poses a real demand risk ahead, in our view. We downgrade AmProp to a HOLD after imputing in a larger discount to RNAV for the property segment. Brexit, a near term risk With more than 90% of AmProp s earnings derived from London, we believe Brexit would raise uncertainty over the future sales at least over the near term. While impact is likely still too early to be ascertained, management guided that buyers had already been more cautious leading to the event. With Brexit, commercial property demand could be uncertain should there be any relocation of headquarters of either European banks or MNCs. This would inadvertently have a knock on effect on residential property. On a brighter note, with London s charm and offerings in terms of its regulatory framework, language and culture, any sharp adverse impact could be mitigated. Campden Hill project partially delayed Separately, AmProp s ongoing development at Campden Hill, in Kensington, London, has been slightly delayed. We understand that there were some conflicting views over the materials to be used for finishing which halted work. The contractor had thus sought an extension of time and the 72 unit project which comprises 4 blocks is now only expected to be partially completed in Feb 2017 (as opposed to late 2016 earlier) and the remainder only in March This means that the recognition of portion of profits will fall into the subsequent financial year, as the handover of keys for the second phase would likely happen only in April FY17E EPS and DPS cut As we had assumed in our earlier forecast full earnings recognition of the Campden Hill project in FY17E, we are cutting our FY17E EPS by 28% due to the partial completion. Our earnings downgrade also takes into account a weaker exchange rate assumption of RM5.50/sterling (previously RM6.00/sterling). Any further 1% depreciation of the Sterling against the RM from our revised assumption will reduce our FY17-19E EPS by 0.7%-0.8%. Based on an unchanged DPS payout ratio of 40%, we also adjust our FY17E DPS downwards to 5.2 sen (previously 7.1 sen). Earnings & Valuation Summary FYE 31 Mar E 2018E 2019E Revenue (RMm) EBITDA (RMm) Pretax profit (RMm) Net profit (RMm) EPS (sen) PER (x) Core net profit (RMm) Core EPS (sen) Core EPS growth (%) (13.6) (8.3) 91.0 (16.6) Core PER (x) Net DPS (sen) Dividend Yield (%) EV/EBITDA (x) Chg in EPS (%) Affin/Consensus (x) Source: Company, Affin Hwang forecasts Company Update Amcorp Properties APRO MK Sector: Properties 5 July 2016 HOLD (downgrade) Upside: 3.5% Price Target: RM0.89 Previous Target: RM1.54 (RM) Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Price Performance 1M 3M 12M Absolute -4.4% -3.9% -1.1% Rel to KLCI -5.3% 0.0% +3.9% Stock Data Issued shares (m) Mkt cap (RMm)/(US$m) 518.1/129.3 Avg daily vol - 6mth (m) wk range (RM) Est free float 21% BV per share (RM) 1.72 P/BV (x) 0.50 Net cash/ (debt) (RMm) (4Q16) 86 ROE (2017E) 7.6% Derivatives Nil Shariah Compliant No Key Shareholders Amcorp Group 71.0% Infotech Mark Bhd 2.1% Sumberama Bhd 1.2% Source: Affin, Bloomberg Kevin Low (603) kevin.low@affinhwang.com Page 1 of 5

2 2 major project completions in FY18E Despite a portion of the Campden Hill project being pushed into the next financial year, we trim our FY18E EPS by 6%, which is largely impacted by the weaker Sterling currency assumption. Nevertheless, FY18E should still be a significantly stronger year in terms of earnings (+91% EPS growth yoy) with the completion of 2 major projects (including the partial Campden Hill project). The Burlington Gate project in Mayfair, London, is slated for completion by 1Q2018, while the current take-up rate for the project has already exceeded 90%. Strong project pipeline beyond FY18 to limit earnings swings Beyond FY18E, there will be several new projects that are tentatively coming on stream. This includes the more recent acquisition and redevelopment of Kilmuir House in Belgravia which will be joined by the Bankside Quarters development, in which Temasek of Singapore is a partner. Project pipeline thus remains strong. Moreover, we understand that management remains proactive in search for new investment assets and development opportunities...but near term concerns will be an overhang While the long term prospects remain intact particularly given the strategic location of its properties, we think that negative sentiment could weigh on the stock in the near term. With >90% of group earnings derived from London, future sales and thus earnings will remain at risk with the onset of Brexit, apart from property completion risk. Nearer term, as earnings are only realised upon project completion, quarterly earnings in the coming quarters will be absent and will only kick in, in the final quarter of FY17E, which could possibly stretch investors patience on the stock. Downgrade to Hold with lower TP of RM0.89 In view of the current headwinds and increased risk, we raise our discount to RNAV for the property segment from 30% to 60% and cut our target price to RM0.89 (previously RM1.54). We estimate that the implied discount to the property segment s RNAV is closer to 63% currently and has ranged between 55-65% over the past year. With the TP revision and increased risk profile, we downgrade the stock to a HOLD from Buy. Key downside risks include a sharp downturn in property prices, weak demand and further delays in completion. Stronger-than-expected demand and improvement in property prices could improve margins and earnings. Page 2 of 5

3 Fig 1: AmProp s SOTP Projects Type Location Est. GDV Developm't Stake Surplus NPV Under / Upcoming Development (RM m) Period (%) (RMm) Kayangan Heights, Shah Alam Residential Shah Alam years 100% 21.1 Sibu Jaya, Sarawak Residential Sibu 1, years 60% 57.3 London Burlington Gate Residential Kensington 1, % 54.6 Campden Hill Residential Holland Park 3, % 76.6 Japan Forest Nanpeidai Residential Shibuya % 17.5 Japan - Court Annex Roppongi Residential Roppongi % 15.4 Concieria Nishi-Shinjuku Tower's West Retail/Office Shinjuku % 15.9 Future development - over 3 years UK - Bankside Quarters Mixed Bankside 5, % UK - Kilmuir House Residential Belgravia % 18.1 Total surplus property NPV Shareholders' 31 Mar RNAV for property division 1,420.5 RNAV based on a 60% discount Renewable energy Projects Type Installed Concession Stake NPV Capacity (MW) Period (years) (%) (RMm) Gemas, Negeri Sembilan Solar % 46.0 Sg Perting, Bentong Hydro % 55.9 Total Renewable Energy NPV Total Sum-of-Parts Shares base (m) Preference shares (m) * Enlarged share base (m) Sum-of Parts 0.89 Source: Affin Hwang forecast Page 3 of 5

4 AmProp FINANCIAL SUMMARY Profit & Loss Statement Key Financial Ratios and Margins FYE Mar (RMm) E 2018E 2019E FYE Mar (RMm) E 2018E 2019E Total revenue Growth Operating expenses (123) (65) (107) (106) (107) Revenue (%) 2 (3) (19) 0 1 EBITDA EBITDA (%) (72) 4 5 Depreciation (11) (10) (13) (14) (15) Core net profit (%) (11) 138 (8) 91 (17) Amortisation EBIT Profitability Net interest income/(expense) (5) (5) (0) (1) (2) EBITDA margin (%) Associates/JV contribution PBT margin (%) EI Net profit margin (%) Pretax profit Effective tax rate (%) Tax (5) (4) (4) (4) (4) ROA (%) Minority interest (1) (2) (1) (1) (1) Core ROE (%) Net profit ROCE (%) Core net profit Dividend payout ratio (%) Balance Sheet Statement Liquidity FYE Mar (RMm) E 2018E 2019E Current ratio (x) Fixed assets Op. cash flow (RMm) 77.9 (40.6) Other long term assets Free cashflow (RMm) 66.5 (49.7) Total non-current assets FCF/share (sen) 11.2 (8.3) Cash and equivalents Stocks Asset management Debtors Debtors turnover (days) Other current assets Stock turnover (days) Total current assets Creditors turnover (days) Creditors Short term borrowings Capital structure Other current liabilities Net Gearing (%) 5.8 (8.6) (6.8) (4.7) (0.9) Total current liabilities Interest Cover (x) (3.2) (8.7) (4.3) (4.4) (4.6) Long term borrowings Other long term liabilities Total long term liabilities Quarterly Profit & Loss FYE Mar (RMm) 4Q15 1Q16 2Q16 3Q16 4Q16 Shareholders' Funds Revenue Operating expenses Cash Flow Statement EBITDA FYE Mar (RMm) E 2018E 2019E Depreciation Pretax Profit EBIT Depreciation & amortisation Net int income/(expense) Working capital changes 55 (54) 6 (0) (0) Associates' contribution Net inct income/(expense) (5) Exceptional Items Cash tax paid (4) 1 (4) (4) (4) Pretax profit Others (80) (100) (74) (145) (120) Tax Cashflow from operations 78 (41) Minority interest Net profit Capex (11) (9) (10) (10) (10) Core net profit Disposal/(purchases) Others (101) Margins (%) Cash flow from investing (83) 37 (10) (10) (10) EBITDA PBT Debt raised/(repaid) (3) (44) Net profit Equity raised/(repaid) Dividends paid - (23) (36) (31) (59) Others (15) (7) Cash flow from financing (18) (72) (36) (31) (59) Net change in CF (23) (76) (15) (16) (43) Free Cash Flow 67 (4) Source: Company data, Affin Hwang forecasts Page 4 of 5

5 Equity Rating Structure and Definitions BUY Total return is expected to exceed +10% over a 12-month period HOLD Total return is expected to be between -5% and +10% over a 12-month period SELL Total return is expected to be below -5% over a 12-month period NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months. OVERWEIGHT Industry, as defined by the analyst s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months NEUTRAL Industry, as defined by the analyst s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months UNDERWEIGHT Industry, as defined by the analyst s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (formerly known as HwangDBS Investment Bank Berhad) ( the Company ) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the Company s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or transactions discussed in this report. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. The Company s research, or any portion thereof may not be reprinted, sold or redistributed without the consent of the Company. The Company, is a participant of the Capital Market Development Fund-Bursa Research Scheme, and will receive compensation for the participation. This report is printed and published by: Affin Hwang Investment Bank Berhad (14389-U) (formerly known as HwangDBS Investment Bank Berhad) A Participating Organisation of Bursa Malaysia Securities Bhd Chulan Tower Branch, 3rd Floor, Chulan Tower, No 3, Jalan Conlay, Kuala Lumpur. research@affinhwang.com Tel : Fax : Page 5 of 5