Titijaya Land Bhd
(Feb 18, RM2)
Maintain buy call with a lower fair value of RM3.10. We maintain our “buy” call on Titijaya Land Bhd with a lower fair value of RM3.10 per share (versus RM3.25 per share previously) pegged to an unchanged 25% discount to its net asset value per share, following a downward revision to our earnings forecast post its second quarter ended Dec 31, of financial year 2015 (2QFY15) results. 

Titijaya recorded a 2QFY15 net profit of RM18 million on the back of RM66 million in revenue. This took first half of FY15 (1HFY15) earnings to RM41 million (+25% year-on-year [y-o-y]). During the quarter, property billings fell about 25% quarter-on-quarter as work progress for some of its projects was hampered by heavy rainfall during the monsoon season. 

Accordingly, we have lowered our FY15 (FY15F) net profit forecast by 10% (RM81 million) to mainly factor in the slower property billings in 1HFY15. We have also toned down our FY15F new sales and pre-sales assumptions to RM700 million (previous: RM1 billion) and RM530 million (previous: RM500 million) respectively, in light of some near-term challenges in the property market. The group achieved new property sales of RM275 million in 1HFY15. Key contributors 

include H20 Block A in Ara Damansara, Petaling Jaya, 3 Elements SoHo and SoFo in Puchong, Subang Parkhomes Phase 1, Embun/Emery @ Kemensah in Selangor and Kuala Lumpur respectively, and its Klang-based projects. 

Nevertheless, sequential earnings momentum is set to recover moving into FY16F with net profit rising to RM100 million (+24% y-o-y) as work progress improves along with better weather conditions. This is anchored by a healthy unbilled sales buffer of about RM700 million or about 2.5 times its FY14 property revenue. 

More importantly, we understand that upcoming launches for 2015 will include Block B of its H20 project (RM191 million), Emporia Soho and Office Suites in Shah Alam (RM225 million), and Emery (RM98 million). 

Furthermore, news flow momentum should be supported by updates of its two prime pieces of land in Kuala Lumpur Sentral and Jalan Eaton in the coming months, which mark its progression into the high-end residential market.

Furthermore, Titijaya’s balance sheet remains strong with a net cash position of about RM28 million as at Dec 31, 2014. This puts the group in a sweet spot to pursue more value-accretive land bank/projects in the near future. — AmResearch, Feb 17

This article first appeared in The Edge Financial Daily, on February 23, 2015.