KUALA LUMPUR (Feb 18): Kenanga IB Research has maintained its “Market Perform” rating on Crest Builder Holdings Bhd at RM1.23 with a lower target price of RM1.29 (from RM1.30) and said the company’s FY14 core earnings of RM13.9 million came in above house expectation, at 131% of its full-year estimates of RM10.6 million (consensus is unavailable).

In a note Wednesday, the research house said the performance was mainly due to a one-off cost arising from UniTapah’s Sukuk issuance and refinancing, which resulted in the reversal of minority interest contributions amounting to RM11.6 million in 9M14.

Kenanga IB Research said although FY14 core earnings exceeded expectations, it was largely due to non-operational reasons.

“We believe it is prudent to trim FY15E core earnings by 13% considering a weaker external orderbook replenishment assumption of RM100 million (versus RM150 million previously), and also slower recognitions on its property billings.

“We believe that Dang Wangi service apartment is unlikely to be launched this year due to the challenging property market, while the group has limited affordable housing products to offer this year,” it said.

“We maintain our Market Perform call with a reduced Target Price of RM1.29 (previously, RM1.30), following our revision in FY15E earnings based on SoP.

“Our SoP valuation basis is extremely conservative (refer overleaf) as we assume a steep 65% discount for property RNAV while only applying 7x FY15E PER on construction and assuming a steep 30% holding company discount,” it said.