• KPPROP’s 1QFY27 core net profit came in at RM2.6m (+17.7% YoY, -29.8% QoQ), accounting for 7.5% of our FY27F forecast, which is below our expectation.
• Earnings visibility remains supported by a 60-acre landbank with a remaining GDV of RM3.9bn, providing a long runway for future Property Development launches.
• We lower our FY27F/FY28F core net profit forecasts by -8.2%/-18.5% respectively, to RM31.5m/RM41.8m, while introducing FY29F core net profit of RM61.2m.
• Maintain a BUY recommendation with a slightly lower TP of RM0.38 (from RM0.40), derived from a revised SOP valuation while incorporating a three-star ESG rating.
Results below expectations. KPPROP reported a 1QFY27 core net profit of RM2.6m (+17.7% YoY; -29.8% QoQ). These accounts for 7.5% of our estimates and below our expectations. The underperformance was mainly due to weaker Property Development margin mix and softer Hospitality contribution, as well as higher selling and distribution expenses to support ongoing sales and development activity.
QoQ. Revenue rose 15.5% QoQ to RM48.7m, mainly on higher Property Development billings and additional sales of completed units, but PBT fell 39.4% QoQ to RM3.4m, mainly due to higher selling and distribution expenses and the absence of a one-off finance-cost benefit in 4QFY26. Core net profit fell 29.8% QoQ to RM2.6m as this quarter finance costs normalised and selling and distribution expenses rose to support ongoing launch and sales activity.
YoY. The 16.2% YoY revenue growth was driven by the Property Development segment (+37.1% YoY to RM21.5m) on faster billing progress at VOX Residence and Viera 15, and by Retail & Leasing (+16.6% YoY to RM5.8m) on higher occupancy at Bloomsvale Shopping Gallery and Office Tower. Hospitality revenue fell 7.1% YoY to RM19.4m on softer room occupancy and fewer banquet/MICE events. At the segment-profit level, Property Development profit nearly halved (-50.3% YoY to RM2.2m) as the prior-year period benefited from higher-margin completed-unit sales and lower distribution costs, while Hospitality segment profit fell 30.0% YoY to RM3.2m in tandem with softer topline. Retail & Leasing was the standout, with segment profit more than doubling (+111.5% YoY to RM2.9m) on better occupancy and cost absorption at the two Bloomsvale assets.
Outlook. We remain conservative on KPPROP’s outlook, supported by its robust pipeline of upcoming launches and ongoing construction progress. The Group’s Property Development will continue to be driven by ongoing construction at VOX Residence, Viera 15 and Senna Heights, together with the newly launched Andabreeze Residences in Batu Kawan, Penang, which carries an estimated GDV of RM780.0m, while the Group prepares further two launches in the Klang Valley. Hospitality remains focused on lifting room occupancy and MICE activity amid a cautious consumer backdrop, while Retail & Leasing should continue to benefit from stable tenant engagement at the two Bloomsvale assets. Earnings visibility remains underpinned by a total landbank of 60 acres and a remaining GDV of RM3.9bn to be unlocked via future launches. This sizeable pipeline should support multi-year Property Development revenue recognition, though the pace of conversion into billings and margins will depend on launch timing and prevailing takeup rates.
Earnings Revision. We take this opportunity to revise our expected property launches for FY27F/FY28F to RM780m/RM200m (from RM720m/RM500m), as the Group has since launched Andabreeze Residences in Batu Kawan in FY27 with an estimated GDV of RM780m, slightly above our earlier RM720m assumption. At the same time, we lower our FY28F launch assumption to RM200m as the two remaining upcoming projects are now targeted for launch in FY29F rather than FY28F, pushing the bulk of new launch GDV out by a year. Consequently, our FY27F/FY28F core net profit estimates are reduced by -8.2%/-18.5% to RM31.5m/RM41.8m respectively, while we introduce FY29F core net profit of RM61.2m.
Valuation. We maintain our BUY recommendation with a slightly lower TP of RM0.38 (from RM0.40), derived from a revised Sum-of-Parts (SOP) valuation and support by a three-star ESG rating.
Risk. Failure to monetise non-core assets, exposure to the cyclicality of the property sector and rising construction costs.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.018207 | 4.049442 |
| EUR | 4.693354 | 4.696955 |
| CNY | 0.599831 | 0.600296 |
| HKD | 0.512802 | 0.516282 |
| SGD | 3.159941 | 3.181439 |