RM22.07million) and a pre-tax profit of RM8.415million (1Q2019: RM2.961million) compared to the corresponding quarter of the preceding year with an increase of 101% and 184% respectively.
Comparing the financial performance to the preceding year quarter, where the group was soft launched its Seresta project which is located at Sri Damansara, and Sena Parc project which is located at Senawang. During the period, the performance was merely relying on Astoria project. In the latest quarter, the performance were contributed from the progress billings from all three projects as mentioned above.
The quarter’s performance were attributed mainly to the property division and the share of results from its jointly controlled entity, Hidden Valley Australia Pty Ltd, supported by the steady contribution from the education division.
(Hidden Valley Australia Pty Ltd has been disappearing from news report after 2017, while it was mentioning the Melbourne project was going to complete soon)
Property division
The property division registered a revenue of RM38.81million (1Q2019: RM15.45million) and an
operating profit of RM8.22million (1Q2019: RM2.04million) compared to the corresponding quarter of the preceding year. The on-going construction progress on its existing projects namely Astoria, Sena Parc and Seresta and the progress billings therefrom contributed to the division’s quarterly revenue and operating profit.
(Astoria project should be completed and handover by first quarter of next year, hence, in the coming Qtr (2,3,4) reports can still maintain its profit level)
Education division
The education division recorded a revenue of RM4.33million (1Q2019: RM3.76million) and an operating profit of RM1.54million (1Q2019: RM1.05million) compared to the corresponding quarter of the preceding year arising from fee increase and the increase in students enrollment for both private and international schools.
Other division
Other divisions recorded an operating loss of RM1.03million (1Q2019: an operating profit of
RM2.04million) on the back of a revenue of RM1.28million (1Q2019: RM3.01million) compared to the corresponding quarter of the preceding year. The lower performance for the current quarter arose mainly from the change in the recognition policy for advance to associates. Advance to associates previously recognized as loans, have now been treated as investment cost as they have similar exposure as investment in ordinary shares.
(The loss making from investment division might be due to the failure in converting the investment into return, it can shows that the management is taking high risk investment. Although this division consists of small portion in the revenue, it is a threat to investors where it might reduce the group profit.)
RM8.42million (4Q2019: RM34.58million).
The material changes in pre-tax profit for the preceding quarter of the previous year were mainly due to the following:-
- the writeback of impairment losses on carpark of RM7.42million and the writeback of accrued costs of RM8.37million from property division, and
- the partial writeback of provision for financial obligation of RM20.80million which was offset by the additional provision for the closure of its club operation of RM2.94million from other divisions
- Reversal of finance cost of RM1.15million following the revision of the Group’s policy to include financial instruments which provides similar exposure as equity
Prospects
The Home Ownership Campaign 2019 (“HOC 2019”) continues to impact positively on the property
market with increases in home ownerships among Malaysians. The campaign has benefited not just the affordable / mass market housing but also the medium to high end residential segment, which is the segment the L&G Group competes in. With HOC 2019 being extended to 31 December 2019 and the revision of Overnight Policy Rate downwards by 25 basis points in May this year, these are expected to provide continuing tractions in the housing market.
The Group expects sales to improve for its on-going projects namely Astoria @Ampang, Sena Parc in
Senawang and Damansara Seresta at Sri Damansara in the coming quarters.
On the education front, the Group is pleased to announce that its new Sri Bestari International School
(“SBIS”) buildings and facilities are ready for the coming academic year 2019/2020. With the completion of the buildings, the Group also expects a steady increase in student enrolments for both SBIS and Sri Bestari Private School.
(From the prospect given in Q1, HOC 2019 helps to boost up local property market and L&G has benefited from this campaign. Moreover, interest rate cut has also stabilized the housing market demand. The new school building might able to increase the revenue and profit for education division. If the new SBIS is based on the current international school capacity, we would see an increase of 11% on the education division profit.)
Comment:
I reckon that the property division performance will maintain the similar earning margin as reported in Q1 FY2020 (EPS = 0.11sen) for the following qtr periods. Hence, the expected EPS throughout FY2020 would be 0.44 without considering any one off gain.
FY19 during Q3 and Q4, there were some additional profits from associated company and write back.
The NTA as per now standing at RM0.40, L&G is currently under valued.
Taking PE as 10 for FY2020. The target price should be RM0.05
L&G group financial performance is very depending on the one off gain or contribution from associated companies. Unless the property division can handover more units to improve the profit.
No comments:
Post a Comment