| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
Financial performance for the first nine months of the fiscal year 2026 (9MFY26) aligned with internal expectations, despite a year-on-year decline in core net profit. The period saw a core net profit of RM25.6 million, representing 61% of the firm’s full-year forecasts but falling below consensus. This was largely anticipated as previous flagship projects reached completion, with newer developments still in their earlier construction phases. However, the third quarter of FY26 (3QFY26) demonstrated a robust sequential rebound, signaling strong operational recovery.
Performance Review
On a year-on-year basis, 9MFY26 revenue decreased by 9.9% to RM298.3 million, with EBIT contracting by 27.8% to RM47.8 million. Core net profit similarly fell 22.6% year-on-year, primarily due to the winding down of major projects like EdgeWood Residences and SkyVogue Residences. This led to a 4.0 percentage point compression in EBIT margin, settling at 16.0%, reflecting a smaller active development base during the period.
The third quarter of FY26 showcased a significant turnaround. Revenue surged 58.1% quarter-on-quarter (QoQ) to RM137.0 million, and core net profit more than doubled, jumping 108.6% QoQ to RM14.7 million. This marked the strongest quarterly earnings since June 2024. The strong performance was underpinned by higher progressive billings from Vesta Residences and initial contributions from recently launched projects, including SkyAwani PRIMA Residences, SkyAwani 6 Residences, and SkyAwani Pearlmont Residences Phase I. Management anticipates this earnings momentum to persist into 4QFY26 as work progresses and new launches gain traction, maintaining the outlook for full-year performance.
Future Outlook and Strategic Initiatives
Looking ahead, the firm launched RM1.5 billion worth of new projects in 9MFY26, achieving 75% of its RM2.0 billion annual target. Strong take-up rates for these recent launches have propelled unbilled sales to RM1.1 billion by end-December 2025, nearly double the RM589.0 million recorded three months prior. This substantial unbilled sales figure provides a healthy 2.8x cover of the FY26 revenue forecast, ensuring solid earnings visibility for the next two to three years.
The company’s balance sheet remains robust, with a net gearing of 0.32x and cash reserves exceeding RM250 million as of December 31, 2025. This prudent financial position offers ample headroom to fund ongoing developments and future launches, supporting continued growth without balance sheet strain. Furthermore, the company’s initiative to industrialize construction through its Prefabricated Prefinished Volumetric Construction (PPVC) facility is progressing well. Construction is targeted to commence in 4QFY26, with operations expected by 3QFY27. This move is anticipated to enhance cost efficiency, improve build timelines, and strengthen margin sustainability in the medium term.
Valuation and Recommendation
TA SECURITIES maintains a “BUY” recommendation for the company. The target price has been raised to RM0.76 (from RM0.70), based on 0.7x P/B with an additional 3% ESG premium, reflecting a positive outlook.
