Plenitude Bhd (OSK Research) trading buy; target price RM3.96

Plenitude
More Surprises on the Upside

Plenitude’s annualised 9MFY10 earnings exceeded our expectation by >20% despite our earnings upgrade in the previous quarter, buoyed by the continuous strong and faster than expected new property sales and progress billings. 9MFY10 turnover and net profit improved by 12% (q-o-q: -32%%) and 5% (q-o-q: -6%) respectively. As the stock’s earnings continue to surprise us on the upside, we are adjusting our earnings forecast upwards and arrive at a slightly higher CY10 target price of RM3.96 based on 0.71x CY10 P/NTA. Maintain Trading Buy.

A solid FY10 so far. If we were to strip out the RM64.4m sales made in 3QFY09 from the Tebrau land sale to the Ikano Group (net gain of ?RM23.5m), 9MFY10 turnover and net
profit would have improved significantly by 60% and 85% respectively. In addition to the low base effect in FY09 (due to much slower property sales at the onset of the global
financial crisis in late 2008/early 2009), the robust earnings so far have been supported by stronger new property sales, faster progress billings (of its ?RM200m in unbilles sales) as
well as some lumpy earnings recognition from newly completed projects that were handed over.

In addition, earnings were also buoyed by the commencement of progress billings in 4QFY09 from its RM190m Bayu Feringghi project in Penang, which was launched in Jan ’09 and has so far seen a 70% take-up for its condos (remaining 30% are Bumi lots) and
30% for its semi-Ds.

Earnings upgrade. To reflect the strong 9MFY10 earnings, we are upgrading our FY10 and FY11 net profit by 22.2% and 27.3% respectively, mainly due to the adjustments to the assumptions on new property sales. Our forecast has yet to account for its recently acquired piece of land in Batu Feringghi (Penang Island), which is located adjacent to its
current ongoing Bayu Feringghi project.

Making its mark in Johor. The recently concluded land sale in Taman Desa Tebrau to the Ikano Group will pave way for the latter to commence the construction of its famed IKEA
mall in the township soon. Although construction works on the mall have yet to commence, we understand that the design works have almost been completed.

Since it would probably take about 2 years to complete and assuming that the construction commences sometime in 2011, then the mall should be up and running by 2012/13.

Maintain Trading Buy. To reflect our earnings upgrade, we are upgrading Plenitude’s CY10 target price slightly to RM3.96 based on 0.71x CY10 P/NTA.



The stock is wellsupported by the company’s anticipated strong earnings growth, robust balance sheet with a net cash of RM2.02/share (71% of current share price and a q-o-q improvement from RM1.82), and the fact that it is trading at a significant 45% discount to its 9MFY10 NAV.

Due to strong 9MFY10 new property sales, faster progress billings as well as some lumpy earnings recognition from newly completed projects that were recently handed over. In addition, earnings were also buoyed by the commencement of progress billings in its Bayu Feringghi project in Penang.

Excluding Tebrau land sale to Ikano Group in 3QFY09, 9MFY10 turnover would have improved significantly by 60% y-o-y.

Comments:

Due to strong 9MFY10 new property sales, faster progress billings as well as some lumpy earnings recognition from newly completed projects that were recently handed over. In addition, earnings were also buoyed by the commencement of progress billings in its Bayu Feringghi project in Penang.

Excluding Tebrau land sale to Ikano Group in 3QFY09, 9MFY10 EBIT would have improved significantly by 70.6% y-o-y.
 
Due to strong 9MFY10 new property sales, faster progress billings as well as some lumpy earnings recognition from newly completed projects that were recently handed over. In addition, earnings were also buoyed by the commencement of progress billings in its Bayu Feringghi project in Penang.

Due to strong 9MFY10 new property sales, faster progress billings as well as some lumpy earnings recognition from newly completed projects that were recently handed over. In addition, earnings were also buoyed by the commencement of progress billings in its Bayu Feringghi project in Penang.

Excluding Tebrau land sale to Ikano Group in 3QFY09, 9MFY10 net profit would have improved significantly by 85% y-o-y.