Company Results 27 November 2014 Crest Builder Holdings Berhad 3QFY14: Below Expectations. Maintained. What s New. Comment.

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1 MALAYSIA INVESTMENT RESEARCH REPORT KDN PP13226/04/2013 (032022) JF APEX SECURITIES BERHAD (47680-X) Company Results 27 November 2014 Crest Builder Holdings Berhad 3QFY14: Below Expectations HOLD Maintained Share Price Target Price RM1.40 RM1.33 Company Description CBHB through its subsidiaries provides construction, land and property investment, as well as mechanical and electrical services Stock Data Bursa / Bloomberg code 8591 / CBH MK Board / Sector Main / Construction & Materials Syariah Compliant status Yes Issued shares (m) Par Value (RM) 1.00 Market cap. (RM m) week price Range(RM) Beta (against KLCI) m Average Daily Volume 0.25m 3-m Average Daily Value^ RM0.37m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % Soon Chow Yong 29.0 Koperasi Permodalan FELDA 4.9 Abdul Jalil Sulaiman Shah 4.2 Historical Chart Source: Bloomberg Research Team ext. 753 research.dept@jfapex.com.my What s New Crest Builder s registered revenue of RM48.3mil and net profit of RM2.2mil in its 3QFY14. The quarterly revenue and net profit declined by 13.3% and 50.1% q-o-q respectively. On a y-o-y basis, 3QFY14 revenue showed an increase of 27.7% while earnings improved by from loss of RM4.7mil to a net profit of RM2.2mil. Below Expectations The Group s 9MFY14 net profit of RM7.4mil (-80%, y-o-y) was below expectations by meeting only 46% of our full year s estimates and 38% of the street s forecast. We believe the lower-than-expected earnings were owing to a multitude of factors such as slower construction progress, weaker property sales and a time lag in the recognition of profits of the group s outstanding construction order book. Comment 3QFY14 Highlights The group s revenue in 3QFY14 decreased by 13.3% q-o-q, mainly attributed to declining revenue of the property segment, as lower sales of its development projects weigh in. As a result, the Group s net profit in 3QFY14 shrank by 50.1% q-o-q accordingly. Yet, on a brighter note, the Group returned to the black by posting net profit of RM2.2mil as compared to net loss of RM4.7mil a year earlier, underpinned by the improved performance of the property segment, as the EBIT of the property segment benefited from higher sales of its development projects. 9MFY14 Highlights For the cumulative 9MFY14 period, net profit of the Group plunged 80% from a year earlier, mainly because of the sharp decline in contributions from its construction and investment holdings segments. The weaker performance of the construction segment is owing to lower construction progress billings, while the investment holdings segment was dragged down by a rise in the maintenance cost of the group s properties. The combined weaker performances of the two divisions was more than enough to offset the improved performance of the property division indicating that EBIT doubled y-o-y. Order book s Health The group has recently secured a contract for the construction of super-structure works worth RM90mil (in Section 52). This contract win is within our expectation as management previously guided that the group is in the running to secure RM150m jobs by year end. This new contract win will bolster the group s current construction order book of RM134m to RM224m. YTD; the group has bagged RM154m of new jobs and hence slightly exceeds our construction order book win assumption of RM120m for FY2014. Please read carefully the important disclosures at end of this publication

2 Sizeable GDV To Underpin Future Earnings Of Property Segment - We still believe the projected future GDV of the Group still stands at c.rm3.7bil (refer Figure 2). We continue to expect the GDV from all its property projects to underpin the future earnings growth of the Group. We reiterate our belief that the timing of property launches is critical for CBHB to excel and enhance its reputation as an up-and-coming niche developer in the Klang Valley. Dangi Wangi Site Visit Update: We recently attended a site visit at the group s maiden TOD project in Dangi Wangi, and walked away a little more assured that progress has been made, even as major works are yet to begin. Progress is reported to be a slower than expected, due to physical constraints (e.g. little headroom for works in the lower basement levels) of undertaking this project. We understand that work on the site started approx. 5 months ago, with approx. RM11.5mil used so far. Works involving micro piles for strengthening purposes has already gone underway. Please refer to (Figure 1) for a pictorial version of construction progress. Dangi Wangi s Financing The group has proposed a private placement of up to 10% of the issued and paid-up share capital of the company, amounting to approx. RM29.8mil based on indicative price of RM1.42 per placement share. It is understood that the proceeds from the raised capital will be used for preliminary expenses in the Dangi Wangi TOD project. This is done as not to overstretch its balance sheet (with current net gearing ratio of 1.3x, and adjusted net gearing ratio of 0.7x excluding sizeable project loan which is recourse to UniTapah concession). Earnings Outlook/Revision We maintain our earnings forecasts following the 3QFY14 results as we expect stronger net earnings in 4Q to match our full year estimates. Our 2014F and 2015F net earnings are at RM16.2mil and RM27.7mil respectively. Valuation/Recommendation Maintain HOLD with unchanged TP of RM1.33 based on our Sum-of-Part valuation, which implies 9x FY2015F fully diluted EPS. 2

3 Figure 1 3

4 Figure 2: GDV of Future Property Projects Projects Partner GDV(RM'b) The Bank, Jalan Ampang (Dang Wangi) Prasarana 1,040 The Galleria, Jalan Ampang MRB 1,330 Kelana Jaya LRT Station Prasarana 1,000 Batu 3, Phase 2 On its own 330 Total 3,700 Project Progress Report Project Completion Progress 2014 TTDI Ascensia approx 20% of total Alam Sanjung approx 50% of total Batu Tiga approx 1% of total Dangi Wangi approx 1% of total The Galleria kick starts in 2015 Kelana Jaya LRT Station kick starts in 2015 Quarterly Figures Year to 31 Dec 3QFY14 2QFY14 3QFY13 QoQ YoY 9MFY14 9MFY13 YoY (RMm) (RMm) (RMm) % chg % chg (RMm) (RMm) % chg Revenue % 27.7% % Operating Profit % 217.6% % % N/A Pre-tax Profit % Profit After Tax % N/A % % N/A Net Profit % Operating Margin (%) 36.3% 43.8% 14.6% -7.4% 21.7% 36.7% 39.0% -2.31% Profit Before Tax Margin (%) 19.9% 29.8% -11.1% -9.9% 31.0% 21.5% 24.2% -2.70% 4.5% 7.8% -12.4% -42.4% % 4.9% 22.6% Net Profit Margin (%) -78.5% 4

5 Segmental Figures FYE 31 Mac 3QFY14 2QFY14 Q-o-Q 3QFY13 Y-o-Y 9MFY14 9MFY13 Change Construction % % % Investment Holdings % % % Property Developments % % % Revenue % % % Construction % % % Investment Holdings % -0.1 N/A % Property Developments % % % EBIT % % % SOP SoP Value (RM'm) Basis Construction 225 Applying PER of 10x construction earnings (based on sustainable order book assumption of RM150m p.a.) Investment holdings Market value of The Crest & Tierra Crest Property RNAV UniTapah concession 24.9 Cost of equity: 10%, concession period: 23 years, stake:51% Net debt -489 Total SoP Proceeds from warrants m warrants with exercise price of RM Outstanding number of shares 165 Additional shares from warrant conversion 21.3 Fully Diluted SoP/share 1.33 Target price implying 9.0x 2015F PER Source: JF Apex 5

6 Financial Summary FY2010 FY2011 FY2012 FY2013 FY2014F FY2015F Revenue EBIT Admin costs Interest PBT Taxation PAT MI Net profit after MI EPS Diluted EPS n/a Growth n/a 104.3% -25.7% 160.2% -42.5% 75.3% PE EBIT margin 6.6% 11.6% 9.7% 36.1% 36.8% 28.7% PBT margin 4.4% 8.5% 5.9% 27.4% 16.9% 16.3% Net margin 3.0% 6.4% 4.3% 24.6% 11.8% 11.4% Effective tax rate 30.8% 21.1% 24.6% 10.3% 30.0% 30.0% Net debt Net gearing 57.6% 73.6% 103.5% 124.7% 126.1% 133.1% ROE 5.8% 10.6% 7.0% 13.2% 3.8% 6.1% BV P/B Source: JF Apex 6

7 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD Head Office: 6 th Floor, Menara Apex Off Jalan Semenyih Bukit Mewah Kajang Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) PJ Office: 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) DEALING TEAM Head Office: Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Wong Wing Haur, Alvin (ext 3226) Institutional Dealing Team: Lim Teck Seng Sanusi Bin Mansor (ext 740) Fathul Rahman Buyong (ext 741) Ahmad Mansor (ext 744) Lum Meng Chan (ext 743) PJ Office: Mervyn Wong (ext 363) Mohd Hanif Wan Said (ext 111) Fong Jia Wen (ext 822) Nursyazaleen Hazwani (ext 362) RESEARCH TEAM Head Office: Lee Chung Cheng (ext 758) Lee Cherng Wee (ext 759) Jessica Low Jze Tieng (ext 756) Elliya Harisna binti Junaedi (ext 752) Norsyafina binti Mohamad Zubir (ext 755) Teo Chee Chung (ext 753) JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock s total returns* are expected to be within +10% to 10% within the next 12 months. SELL : The stock s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 7