AmProp’s prime London projects remain popular

Take-up for its Campden Hill project continues to rise: it crept up from a 30% level since Sept 24, 2015 to 40% currently. Take-up for its Burlington project remains at more than 80%. These projects should provide high earnings visibility upon their completion in 2017.

Headline net profit of RM79 million for first half ended Sept 30, 2015 (1HFY16) has already exceeded FY15 net profit of RM35 million, potentially allowing for a higher dividend per share (DPS) ahead.

While we continue to model in a four sen DPS of FY16E (estimate), this may however be conservative with a high risk of dividend upside considering the stronger FY16E net profit vis-à-vis FY15 and modest financial commitments. Hence, should the FY16E dividend-payout ratio match FY15’s 50%, our forecast dividend could double and the dividend yield exceed 8%.

We continue to forecast a FY15 to FY18E earnings per share compound annual growth rate of 64%, which is underpinned by the delivery of its London properties’ gross development value of more than RM1 billion for Burlington and Campden Hill, and to a lesser extent its Tokyo re-developments over FY17 to FY18E.

Trading at a FY17E price-earnings ratio of five times, and at a near 40% discount to our sum-of-parts-based 12-month TP of RM1.53, the stock remains mispriced, in our view. Apart from growth, the lure in AmProp lies in its strong earnings visibility, as well as appealing dividend yields of 5%  to 7% over FY17 to FY18E. Reaffirm “buy”. — Affin Hwang Capital, Dec 2

This article first appeared in The Edge Financial Daily, on December 3, 2015. Tap here to subscribe for your personal copy.