MALAYSIA INVESTMENT RESEARCH REPORT KDN PP13226/04/2013 (032022) JF APEX SECURITIES BERHAD (47680-X) Company Update 5 March 2014 Crest Builder Holdings Berhad BUY Order Book Replenishment In Sight Maintained Share Price RM1.56 Result Target Price RM1.81 • We attended the Q4FY2013 results briefing hosted by Crest Company Description Builder Holdings (CBHB) with further affirmation to our positive CBHB through its subsidiaries provides call on the company. construction, land and property investment, as well as mechanical and electrical services Comment • New contracts in the pipeline – We understand that the Stock Data Group is close to securing two building projects under its Bursa / Bloomberg code 8591 / CBH MK construction division amounting to RM500m in total. We further Main / Construction understand that the Group, which specializes in constructing Board / Sector & Materials high-rise building projects, has got 80% of its tender book Syariah Compliant status Yes targeting building projects that command high profit margin. The Issued shares (m) 159.9 remaining focus is in the infrastructure projects whereby the Par Value (RM) 1.00 Group is aiming for utility-based infrastructure projects Market cap. (RM’m) 247.8 particularly in the East Coast Economic Region (ECER). 52-week price Range(RM) 0.84-1.59 Beta (against KLCI) 1.42 • Starting the year on a positive note – To recap, the Group 3-m Average Daily Volume 0.66m got off to a good start in FY2014 by clinching a contract from 3-m Average Daily Value ^ RM1.01m Naza Engineering & Construction Sdn Bhd worth RM63.9m to construct a 36-storey serviced apartment in Jalan Damansara, Share Performance Kuala Lumpur. We view the contract win positively as it 1m 3m 12m replenishes the Group’s depleting construction order book to Absolute (%) 3.33 -0.64 83.43 c.RM110m. We are hopeful of the Group’s chances of clinching Relative (%-pts) 0.93 5.96 64.74 more projects while do not rule out the possibility of our Major Shareholders % RM400m per annum assumption of new contracts win being Yong Soon Chow 27.83 surpassed. TENGKU DATO’ SULAIMAN SHAH 4.26 • Koh Hua Lan 3.58 Massive GDV to be realized – As of to date, the Group has c.RM3.7b of property projects under its belt (refer Figure 1) with 3 mega JV projects with GLC hogging the limelight. The Group expects to launch The Bank, a JV project with Prasarana which sits atop of Dang Wangi LRT station, in 4QFY2014. The mixed Historical Chart development project comprises of SOFO and SOHO residences 1.80 with Average Selling Price (ASP) of RM1500 psf, rendering a GDV 1.60 of more than RM1b. We expect the staggering GDV from all its 1.40 1.20 property projects to underpin earnings growth of the Group, 1.00 while also enhance its reputation as a property developer. 0.80 0.60 0.40 0.20 Earnings Outlook/Revision 0.00 • We keep our earnings forecasts until the Group secures projects worth more than RM400m in total, which exceeds our Source: Bloomberg assumption. Soong Wei Siang 03-87361118, ext. 754 [email protected] Please read carefully the important disclosures at end of this publication 5 March 2014 Company Result – Crest Builder Holdings Berhad JF APEX SECURITIES Valuation/Recommendat ion • Maintain BUY with unchanged target price of RM1.81 based on our Sum-of-Part valuation, which implies a 8x FY2014F PER, close to its 3-year mean PE. Our TP offers 16% of upside from last closing price as we believe the market has yet to fully price in the Group’s three big scale mixed development projects worth more than RM3b of GDV in total. • Positive news flow to spur the share price - We expect the positive news flow of new projects win in the construction division to drive the share price in near term, while the commencement of the concession agreement in 2QFY2014 to maintain the UniTapah campus would further provide stable recurring income to the Group. Figure 1: GDV of Property Projects Projects Partner GDV(RM'm) The Bank, Jalan Ampang (Dang Wangi LRT Station) Pra sarana 1,040 Malaysian Rubber The Galleria, Jalan Ampang Board 1,330 Kelana Jaya LRT Station Prasarana 1,000 Batu 3, Phase 2 On its own 320 Total 3,690 Source: Company, JF Apex 2 5 March 2014 Company Result – Crest Builder Holdings Berhad JF APEX SECURITIES Sum-of-Part Valuation Value SoP (RM'm) Basis Applying PER of 12x construction earnings (based on sustainable orderbook of RM400m Construction 288 p.a.) Investment holdings 204.9 Market value of The Crest & Tierra Crest Property 121.7 RNAV Cost of equity: 10% , concession period: 23 UniTapah concession 25.3 years, stake:51% Net debt -331.1 FY2012 net debt Total SoP 308.8 Proceeds from warrants 24.3 24.3m warrants with exercise price of RM1 333.1 Outstanding number of shares 159.4 Additional shares from warrant conversion 24.3 Fully Diluted SoP/share 1.81 Target price implying 8x 2014F PER Source: Company, JF Apex Financial Summary FYE 31 Dec (RM'm) FY2011 FY2012 FY2013 FY2014F FY2015F Revenue 441.5 485.1 223.4 534.8 697.6 EBIT/ Operating profit 51.4 46.8 80.7 76.8 94.9 PBT 37.4 28.1 61.2 43.0 56.3 Net profit 30.4 21.6 50.7 35.9 47.3 PER (x) 8.2 11.6 4.9 7.0 5.3 EBIT Margin 11.6% 9.6% 36.1% 14.4% 13.6% PBT Margin 8.5% 5.8% 27.4% 8.0% 8.1% Net Margin 6.9% 4.5% 22.7% 6.7% 6.8% Source: Company, JF Apex 3 5 March 2014 Company Result – Crest Builder Holdings Berhad JF APEX SECURITIES JF APEX SECURITIES BERHAD – CONTACT LIST JF APEX SECURITIES BHD DEALING TEAM RESEARCH TEAM Head Office: Head Office: Head Office: 6th Floor, Menara Apex Kong Ming Ming (ext 3237) Lee Chung Cheng (ext 758) Off Jalan Semenyih Shirley Chang (ext 3211) Lee Cherng Wee (ext 759) Bukit Mewah Norisam Bojo (ext 3233) Jessica Low Jze Tieng (ext 756) 43000 Kajang Wong Wing Haur, Alvin (ext 3226) Soong Wei Siang (ext 754) Selangor Darul Ehsan Gabriela Fang Minn Fern (ext 753) Malaysia Institutional Dealing Team: Elliya Harisna binti Junaedi (ext 752) Lim Teck Seng General Line: (603) 8736 1118 Sanusi Bin Mansor (ext 740) Facsimile: (603) 8737 4532 Fathul Rahman Buyong (ext 741) Ahmad Mansor (ext 744) PJ Office: Lum Meng Chan (ext 743) 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin PJ Office: 46050 Petaling Jaya Mervyn Wong (ext 363) Selangor Darul Ehsan Mohd Hanif Wan Said (ext 111) Malaysia Fong Jia Wen (ext 822) Nursyazaleen Hazwani (ext 362) General Line: (603) 7620 1118 Facsimile: (603) 7620 6388 JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock’s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock’s total returns* are expected to be within +10% to – 10% within the next 12 months. SELL : The stock’s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock’s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock’s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to – 10% within the next 12 months. UNDERWEIGH T : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD – DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 4 .