Results Note

24 May 2019

Amverton Berhad UNDERPERFORM ↔

1Q19 Below Expectations Price: RM1.16
Target Price: RM1.00 ↔
1Q19 CNP of RM0.9m came below our expectations, at only Expected Capital Gain: -RM0.16 -13.8%
5%, mainly due to the weaker-than-expected property Expected Divd. Yield: RM0.00 0.0%
segment earnings. Pending 1Q19 sales information, we Expected Total Return: -RM0.16 -13.8%
reckon sales could be slow as property sector remains
challenging. No dividend declared as expected. Post-results, KLCI Index 1,601.87
we cut our FY19-20E CNP by 43-40% after lowering both
Stock Information
sales target and property segment margin assumptions.
Bloomberg Ticker AM MK Equity
Maintain UNDERPERFORM with an unchanged TP of RM1.00.
Bursa Code 5959
Below expectations. 1Q19 CNP of RM0.9m came way below our Listing Market Main Market
expectation, only accounting for 5% of our full-year estimate. The Shariah Compliant Yes
negative deviation mainly stems from the weaker-than-expected property Shares Outstanding 365.1
segment. 1Q19 sales information is pending from management. Market Cap (RM m) 423.5
However, we reckon sales could be slow as the outlook for the property Par value per share (RM) 0.50
sector remains challenging. No dividend was declared, as expected. 52-week range (H) 1.28
52-week range (L) 0.87
Results highlight. YoY-Ytd, CNP declined by 75% mainly due to: (i) Free Float 26%
decline in property segment revenue (-43%) from lower property sales, Beta 1.2
and (ii) lower property segment’s operating margin (-13 ppt) likely due to 3-mth avg daily vol: 127,508
recognition of lower margin property product. QoQ, 1Q19 CNP declined
by 88%, which we reckon could be due to lower-margin property Major Shareholders
products being sold as CNP margin is only at 4% (vs 4Q18 CNP margin Dalta Industries Sdn Bhd 58.4%
of 37%). Boon Thong Ng 10.9%
Golden Approval Sdn Bhd 4.9%
Outlook. For FY19, the group is not targeting any new launches with
their focus currently on clearing existing unsold units at Amverton Hill, Summary Earnings Table
Sungai Buloh (semi-detached and bungalow units) and Amverton Links, FY Dec (RM m) 2018A 2019E 2020E
Klang (double-storey houses) projects. Management’s sales target for Turnover 122.3 121.4 125.6
FY19 is at RM45.2m (RM36.8m from Amverton Hill and RM8.4m from EBIT 39.0 11.9 12.9
Amverton Links). The group is more inclined to only launch new projects PBT 93.7 14.0 15.0
after FY19 given the current weak property market. Potential projects Net Profit 75.5 9.9 10.6
may include double-storey terrace houses at Amverton Hill and a Core PATAMI 23.9 9.9 10.6
Retirement Village at Amverton Cove, Pulau Carey. Its unbilled sales is Consensus (NP) n.a. n.a. n.a.
estimated to be lower than RM30m, providing less than half year of Earnings Revision n.a. -43% -40%
earnings visibility. Core EPS (sen) 6.6 2.7 2.9
Core EPS growth (%) -2% -59% 7%
Earnings review. Post results, we cut our FY19-20E CNP by 43-40%, NDPS (sen) 0.0 0.0 0.0
after reducing our sales target by 13-14% to RM34.6-33.7m in view of NTA per Share (RM) 1.9 1.9 2.0
the weak property market. We also lowered our property margin Price to NTA (x) 0.6 0.6 0.6
assumption after considering the low property segment’s operating PER (x) 17.7 42.9 40.0
margin this quarter likely from higher portion of lower-margin property Debt-to-Equity ratio (x) 0.0 0.0 0.0
products being sold. Return on Asset (%) 3% 1% 1%
Maintain UNDERPERFORM with an unchanged SoP-driven Target Return on Equity (%) 11% 1% 1%
Price of RM1.00 (property RNAV discount of 88%), implying 83% Net Div. Yield (%) 0% 0% 0%
discount to its SoP/share of RM5.88 (partial GDV and partial land bank Share Price Performance
basis). Our applied discount of 88%, which is already the steepest in our 1.35
1880
universe, is due to their slow pace in unlocking the value of their Pulau 1.25

1.15 1830
Carey landbank, which forms the bulk of the valuation. 1.05
1780

Risks to our call include: (i) stronger-than-expected margins/property 0.95

0.85 1730

sales, and (ii) positive change in government housing policy. 0.75 1680
0.65
1630
0.55

0.45 1580

AM MK Equity FBMKLCI INDEX

1 mth 3 mths 12 mths

Absolute (%) 1.8% 16.0% 18.4%
Relative (%) 4.0% 22.9% 28.2%

Adrian Ng Wei Gek / Loo Tungwye

adrian.ng@ / [email protected]
+603-2172 2639 / +603-2172 2654

PP7004/02/2013(031762) www.kenanga.com.my www.bursamids.com Page 1 of 5

Amverton Berhad Results Note
24 May 2019

Results Highlights
FYE Dec (RM'm) 1Q19 4Q18 QoQ 1Q18 YoY
Turnover 22.8 21.3 7% 29.9 -24%
EBIT 1.5 17.4 -92% 4.9 -70%
Interest inc/(exp) 0.6 0.7 -15% 0.5 3%
Associates/JV 0.0 0.0 n.m. 0.0 n.m.
Exceptional items 0.0 44.5 -100% 0.0 n.m.
Forex gain/(loss) 0.0 0.0 n.m. 0.0 n.m.
Pretax profit 2.0 62.5 -97% 5.5 -63%
Taxation -0.9 -10.0 -91% -1.4 -38%
Deferred tax 0.0 0.0 n.m. 0.0 n.m.
Profit after tax 1.1 52.5 -98% 4.1 -72%
Minority interest -0.2 -0.2 -4% -0.5 -49%
PATAMI 0.9 52.3 -98% 3.6 -75%
Core PATAMI 0.9 7.8 -88% 3.6 -75%
DPS (sen) 0.0 0.0 0.0

EBIT margin 6% 82% 16%

Pretax margin 9% 293% 18%
NP margin 9% 293% 18%
CNP margin 4% 37% 12%
EPS (sen) 0.2 14.3 1.0
Core EPS(sen) 0.2 2.1 1.0
BV/share (RM) 2.0 2.0 1.8
Net gearing (x) -0.1 -0.1 -0.1
Effective tax 43% 16% 26%
Source: Company, Kenanga Research

Segmental Breakdown
External Turnover Segmentation 1Q19 4Q18 QoQ 1Q18 YoY
Property 9.3 6.4 44% 16.2 -43%
Manufacturing 8.0 8.0 0% 7.8 2%
Hotel 4.4 5.8 -24% 4.4 2%
Plantation 1.0 1.0 4% 1.6 -33%
Total 22.8 21.3 7% 29.9 -24%
Operating Profit Segmentation
Property 0.9 60.3 -98% 3.8 -75%
Manufacturing 0.3 0.6 -54% 0.3 -7%
Hotel 0.4 1.5 -76% 0.4 -5%
Plantation -0.1 -0.5 -78% 0.5 -121%
Total 1.5 61.9 -98% 4.9 -70%
Operating margins
Property 10% 938% 23%
Manufacturing 3% 7% 4%
Hotel 8% 25% 8%
Plantation -10% -50% 33%
Source: Company, Kenanga Research

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Amverton Berhad Results Note
24 May 2019

Sum-of-Parts
Projects on DCF Stake Land Remaining Eff. Remaining Eff. Assumed WACC NPV Value
basis size GDV (RM'm) Net Profit (RM'm) Duration (%) (RM'm)
(ac) (years)
Amverton Hills, Sg 100% 124 1,824 383 10 11% 226
Buloh
Amverton Links, 100% 23 100 21 3 11% 17
Klang
PK 11, Klang 100% 12 548 115 5 11% 69
Amverton Cove, 60% 1,063 4,092 859 20 11% 342
Pulau Carey
Mont Kiara 100% 3 248 52 4 11% 33
Morib, Banting 100% 185 1,200 252 10 11% 148
Unbilled Sales 100% 24 7 2 11% 25
Projects on Land Stake Land Book Value Book Value Market Value Market Surplus/
Valuation Basis size (RM'm) (RM'psf) (RM'psf) Value (Deficit)
(ac) (RM'm)
Pulau Carey 60% 839 219 6 20 731 307
Klang land 100% 182 71 9 60 476 405
Melaka agriculture 74% 164 16 2 3 21 4
land
Morib, Banting 100% 9 0.3 0.7 1.0 0.4 0.1
Seremban 100% 6 0.2 0.7 1.0 0.3 0.1
Property: Revised 1,576
Asset Value
Property Book 448
Value
Hotel/Leisure Book 124
Value
SOP 2,148
SOP/sh (RM) 5.88
Share Base ('m) 365
Property RNAV -88% -1781.3
Discount
Implied SOP -83%
Discount
Target Price (RM) 1.00
Source: Kenanga Research

PP7004/02/2013(031762) Page 3 of 5
 Amverton Berhad Results Note
24 May 2019

Peer Comparison
Net
Last Core Earnings
Name Market Shariah Current Revenue Growth PER (x) - Core Earnings PBV (x) ROE (%) Div.Yld. Target Rating
Price Growth
(%)
Cap 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 1-Yr. 1-Yr. Price
(RM) Compliant FYE Hist. Hist.
(RM'm) Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. (RM)
PROPERTY DEVELOPERS UNDER COVERAGE
AMVERTON BHD 1.16 423.5 Y 12/2019 -0.7% 3.4% -58.8% 7.3% 17.7 42.9 40.0 0.6 0.6 1.4% 0.0% 1.00 UP
ECO WORLD 0.850 2,502.7 Y 10/2019 -4.4% -18.3% 23.4% 23.9% 15.1 12.2 9.9 0.7 0.6 4.5% 1.2% 1.15 OP
DEVELOPMENT GROUP
HUA YANG BHD 0.340 119.7 Y 03/2019 9.0% 0.3% 149.1% 22.3% 27.1 10.9 8.9 0.2 0.2 1.8% 0.0% 0.410 MP
IOI PROPERTIES GROUP 1.17 6,442.2 Y 06/2019 -15.0% -6.0% 0.8% -3.4% 9.7 9.7 10.0 0.4 0.3 3.6% 4.3% 1.65 OP
BHD
LBS BINA GROUP BHD 0.560 873.0 Y 12/2019 31.3% 0.9% 7.9% 3.4% 10.3 9.5 9.2 0.6 0.6 6.6% 3.2% 0.675 MP
MAGNA PRIMA BHD 0.825 274.4 Y 12/2019 40.0% 11.1% 9637.5% 338.9% N.A. 1,095.2 249.5 0.8 0.8 0.1% 0.0% 0.740 UP
MAH SING GROUP BHD 0.925 2,245.6 Y 12/2019 4.5% 7.0% -2.5% 1.0% 13.7 14.0 13.9 0.6 0.6 5.2% 4.3% 1.05 OP
MALAYSIAN RESOURCES 0.900 3,959.9 Y 12/2019 5.0% 5.0% 26.9% 19.5% 52.4 41.3 34.5 0.8 0.8 2.0% 1.9% 0.750 UP
CORP BHD
SIME DARBY PROPERTY 0.970 6,596.8 Y 12/2019 13.6% 12.5% 7.8% 16.9% 18.0 16.7 14.3 0.7 0.7 4.1% 2.4% 1.10 OP
BHD
SP SETIA BHD 2.00 8,065.0 Y 12/2019 7.8% 29.7% 71.3% 50.5% 36.7 21.5 14.3 0.5 0.5 2.5% 3.5% 2.45 OP
SUNSURIA BHD 0.650 578.4 Y 09/2019 -36.0% 25.2% -31.8% 26.6% 4.2 6.3 4.9 0.6 0.6 10.4% 0.0% 0.760 OP
SUNWAY BHD 1.68 8,209.2 Y 12/2019 -2.7% 12.6% -8.5% 22.4% 14.0 15.3 12.5 1.0 1.0 6.8% 3.5% 1.60 MP
UEM SUNRISE BHD 0.850 3,856.8 Y 12/2019 37.0% -14.3% 9.0% -11.7% 11.8 10.8 12.3 0.6 0.6 4.9% 1.2% 0.850 MP
UOA DEVELOPMENT BHD 2.30 4,240.6 Y 12/2019 0.6% -0.4% 4.6% 0.9% 12.7 12.2 12.1 0.9 0.9 7.4% 6.1% 2.15 MP
Simple Average 6.4% 4.9% 702.6% 37.0% 18.7 94.2 31.9 0.6 0.6 4.4% 2.3%
*SIMEPROP change of FY-end from 30-Jun to 31-Dec. Out historical numbers are based on FY18A while 1-Yr and 2-Yr Fwd are based on FY19E and FY20E figures

CONSENSUS NUMBERS
GLOMAC BHD 0.350 273.1 Y 04/2019 -37.9% 22.4% -81.8% 179.8% 8.7 47.9 17.1 0.3 N.A. 0.6% 1.1% 0.390 SELL
MATRIX CONCEPTS 1.92 1,485.7 Y 03/2019 25.1% 12.1% -2.3% 11.5% 7.0 7.1 6.4 1.1 1.1 16.2% 6.3% 2.33 BUY
HOLDINGS BHD
PARAMOUNT CORP BHD 2.08 901.4 Y 12/2019 -1.4% 8.4% 2.4% 5.3% 9.8 9.6 9.1 0.8 N.A. 7.2% 4.3% 2.56 BUY
TAMBUN INDAH LAND 0.745 322.9 Y 12/2019 -14.3% 10.6% -24.0% 9.5% 5.8 7.7 7.0 0.5 N.A. 7.3% 5.6% 0.933 BUY
BHD
TITIJAYA LAND BHD 0.290 371.0 Y 06/2019 -14.3% 13.9% -28.4% 17.1% 5.1 7.1 6.1 0.3 0.3 3.9% 1.7% 0.385 BUY
YONG TAI BHD 0.340 181.6 Y 06/2019 33.2% 102.7% -143.0% 42.2% 11.7 N.A. 11.5 0.4 0.4 -3.5% 0.0% 0.352 NEUTRAL
Source: Kenanga Research

PP7004/02/2013(031762) Page 4 of 5
Amverton Berhad Results Note
24 May 2019

Stock Ratings are defined as follows:

Stock Recommendations

OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%

MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%

Sector Recommendations***

OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%

NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%

** The Expected Total Return might contain rounding discrepancy.

***Sector recommendations are defined based on market capitalisation weighted average expected total
return for stocks under our coverage.

This report has been prepared by Kenanga Investment Bank Berhad pursuant to the Mid and Small Cap Research Scheme (“MidS”)
administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the
subject company. Bursa Malaysia Berhad and its group of companies disclaim any and all liability, howsoever arising, out of or in relation to
the administration of MidS and/or this report.

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not
make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to
the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This
document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees.
Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document
or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or
employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or
otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies.

Published and printed by:

KENANGA INVESTMENT BANK BERHAD (15678-H)

Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia Chan Ken Yew
Telephone: (603) 2172 0880 Website: www.kenanga.com.my E-mail: [email protected] Head of Research
This report is accessible at www.bursamids.com too.

PP7004/02/2013(031762) Page 5 of 5