Malton ... Nov11

Inet Research

1. 1QFY2012 Results Highlight / Review
- Malton’s 1QFY12 results were within our expectations as we are projecting a stronger performance in the coming quarters with the recognition of sales from on-going property development projects (Amaya Maluri, Bukit Rimau shops) and construction & project management contracts coming through.

- Revenue in 1QFY12 increased by 44% YoY whilst profits at the pre-tax and net levels more than doubled, reflecting the recognition of income from on-going projects as well as new projects such as Amaya Maluri at the main property development division. The construction and project management division also
contributed to the better financial performance, due to construction progress of external projects.

- The stock is currently trading at low PE and PB valuations whilst the group’s balance sheet position is strong, with an estimated net cash position of RM44m as at the end of Sep 2011.

- BUY recommendation maintained with an RNAV-based price target of RM1.60/share, which implies a FY12F PE of 9x and PB of 1x, based on our earnings projections.

2. Key Investment Risks
Key investment risks for Malton include:
a) Potential softening of demand in the property market in the event of economic tightening measures
imposed by the government to counter inflationary pressures, which may impact on potential buyers’
affordability; and

b) Inflated raw material input costs for the property development and construction divisions due to
supply constraints and higher prices amid economic uncertainties.

3. Recent Developments
On 10 Nov 2011, Gapadu Harta Sdn Bhd (GHSB), an indirect wholly-owned subsidiary entered into a sale and purchase agreement (SPA) with Ukay Spring Development Sdn Bhd (USDSB) for the acquisition of land
located in Ulu Kelang measuring approximately 56.05 acres for total purchase consideration of RM105m. On
12 Oct 2006, GHSB had entered into a joint venture agreement with USDSB and Mr Liong Kok Wah for the development of the same piece of land.

The SPA is conditional upon USDSB securing the written approval of the State Authority for the sale and
transfer of the Sub-divided Master Land in favour of GHSB within 2 months from the SPA date.

4. Earnings Outlook
Malton’s revenue and profit in FY12F-13F are expected to be supported by total unbilled sales from existing
property development projects of around RM250-300m currently, as well as billings from the RM175m Jaya
Shopping Centre construction project.

In addition to existing projects, new launches in the pipeline include:
o Ukay Springs initial phase, Ampang semi-detached and bungalow houses (GDV of RM120m, targeting launch in end FY2011);
o Nova Saujana serviced apartments (GDV of RM320m, targeting launch in end FY2011);
o Seri Kembangan serviced apartments (GDV of RM180m, targeting launch in end FY2011);
o Sungai Buloh commercial development (GDV of RM500m, targeting launch in early FY2012);
o Bukit Rimau semi-detached and bungalow houses (GDV of RM15m); and
o Cantonment Road, Penang high-end duplex condominiums (GDV of RM50m, targeting launch in
early FY2012).

Due to the many in-house property development projects, Malton’s construction and project management
division is currently not aggressively bidding for new external projects.

5. Valuation & Recommendation
Malton is currently trading at low PE and PB valuations whilst the group’s balance sheet position is strong,
with an estimated net cash position of RM44m as at the end of Sep 2011. We are maintaining our BUY
recommendation with an RNAV-based price target of RM1.60/share, which implies a FY12F PE of 9x and PB of 1x, based on our earnings projections.