Investment Highlights

• We are maintaining our BUY recommendation on Titijaya with a lower fair value of RM0.41 from RM0.47 based on a 45% discount to its RNAV (Exhibit 3).

• We cut FY19–21F forecasts by 20% and 14% and 15% to RM55.4mil, RM61.5mil and RM66.9mil respectively to reflect the timing of revenue recognition.

• Titijaya's 1HFY19 net profit of RM22.1mil came in below expectations at only 32% and 34% of our full-year forecast and full-year consensus estimates respectively.

• 1HFY19 revenue declined by 34.9% YoY due to lower recognition on new projects namely 3rdNvenue – New Suites, Park Residency and Riveria – Phase 1 as these projects are still at the early stage of construction. Nonetheless, EBIT margin remained stable at 24.0% vs. previous year’s 23.8%.

• Titijaya registered new sales of RM258mil YTD while unbilled sales of RM364mil will provide earnings visibility for the next 2–3 years.

• The downgrade in earnings and FV is largely to reflect the slower take-up rates in the construction period for its existing and future launches.

• Financial leverage remained stable despite higher net gearing of 22% as compared with 18% YoY.

• Overall, Titijaya has lined up RM826mil of new launches (high-rise residential) over the immediate term, with the key selling points being: (1) affordability for units in Phase 1 of Damai Suria @ Bukit Subang @RM300K-450K – GDV RM168mil); and (2) premium locations for units in Riveria, KL Sentral @ RM300K- 500K – GDV RM320mil; and Phase 2 of 3rdNvenue @ RM450K-RM1mil – GDV RM338mil.

• Currently, Titijaya has total landbank of 208 acres, located mainly in Klang Valley with a GDV of RM12.4bil, providing good earnings visibility and will drive the company’s growth going forward.

• We expect the property market to remain subdued in the short-to-medium term with many potential buyers having difficulty in obtaining loans due to their already high debt service ratios.

Source: AmInvest Research - 27 Feb 2019