Ayer Holdings Bhd (Aug 13, RM4.30)
Maintain neutral with an unchanged target price (TP) of RM5.47: Ayer Holdings Bhd’s second quarter of financial year 2019 (2QFY19) net profit came in at RM1.4 million (-50% quarter-on-quarter; -79.4% year-on-year [y-o-y]), which was within our expectations. Although the group showed a net profit of RM4.3 million for the first half (1H) of FY19, only constituting 40.2% of our full-year estimate, we believe its 2HFY19 profit performance will gather speed. Again, we believe the property division’s profit for the quarter was driven by its 140-unit landed villa development in its flagship township, Bandar Bukit Puchong. Our earnings forecasts are kept unchanged for now as we are still waiting for more clarity on future property launches as the group continues to focus on the replanning of its township in Bandar Bukit Puchong. We note that the frequent turnover of the group’s top management is a concern. We reiterate our “neutral” call with an unchanged sum-of-parts-based TP of RM5.47.
Ayer’s property revenue dropped 37.6% y-o-y to RM12.7 million due to the absence of sale of completed units but was mitigated by billings from current developments. Correspondingly, group property profit before tax was lowered by 70% to RM2.98 million. To recap, the property billings, we believe, mostly came from ongoing property projects, for example, the Andira Park project which consists of 140 units of gated and guarded landed villas sitting on an 8.3-acre (3.36ha) plot of freehold land launched in the third quarter of calendar year 2017. — PublicInvest Research, Aug 15