Netflix shares fell more than 8% in after-hours trading , as a disappointing second-quarter outlook and leadership changes outweighed otherwise solid first-quarter results. Weak Guidance Sparks Sell-Off Netflix forecast Q2 earnings of US$0.78 per share , below analyst expectations of US$0.84 , while revenue is projected at US$12.57 billion , missing the US$12.64 billion consensus . The weaker guidance raised concerns over near-term growth momentum , triggering a sharp negative market reaction. Strong Q1 Performance Fails to Impress For the first quarter: Revenue rose 16% YoY to US$12.25 billion (above estimates) Earnings surged 86% to US$1.23 per share However, earnings were boosted by a US$2.8 billion one-off termination fee , reducing the quality of underlying growth. Operating margin improved to 32.3% , but still came in below expectations (32.4%) , further dampening sentiment. Rising Costs and Strategic Sh...
Maintain outperform with unchanged target price (TP) of RM0.50
MK Land started FY17 with a net profit of RM4.1m (+46.4% YoY, -1.7% QoQ), which was below expectations. The 1Q net profit only constituted 15% of our full year estimates. With no meaningful launch in FY16 in the Klang Valley and while existing inventory is still slow moving, revenue dropped 21.3% QoQ. As reported, we already expected the Group’s earnings to remain slow due to the lack of new launches and absence of land sale. The timing of new projects are still sketchy, given current tough operating environment. Pending clarity from Management, we keep our earnings unchanged for now and maintain our Outperform call from a valuation standpoint with TP of RM0.50, pegged at a c.70% discount to our RNAV estimate.
- Limited new launches. So far, it has only launched the first phase of its Residensi Suasana @ Damai condominium project. We understand that only c.65% of the 260 units were sold as at August. To recap, the development has 3 phases with combined 780 units and an estimated RM400m in value. As mentioned earlier, new sales might be helped by en-bloc sales for its new project to minimize selling risks. As for unsold stocks, we understand that it still has c.RM100m worth of unsold units from Armanee Terrace and c.RM600m from the remaining phases of the semi-detached ‘The Rafflesia”.
- Non-core asset disposal. This year, there is still no meaningful land sale transacted. Among the land earmarked for sale include its Setiawangsa land valued at c.RM96m or RM40psf and a 5-acre piece in Damansara Perdana that could be offloaded for c.RM500psf. In our RNAV estimates, we estimate the land in Setiawangsa at RM40psf and residential land in Damansara Perdana at RM200psf.
- Maintain Outperform from a valuation standpoint, and TP of RM0.50 pegged at a c.70% discount to our RNAV estimate. The current weak market environment could see the Group’s earnings drop further if there are no new projects or land sale. In addition, we believe that the Group’s asking price on the land for sale is on the high side, and hence might take longer than expected. As such, with no key earnings drivers, we believe its earnings will be under pressure in the near term.
Source: PublicInvest Research - 25 November 2016
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