Investment Highlights

• We are maintaining our HOLD recommendation on Titijaya with a lower fair value of RM0.30 from RM0.31 based on a 55% discount (previously 50%) to its RNAV (Exhibit 2).

• We cut our FY20 and 21F forecasts by 12% and 7% to RM44.1mil and RM52.1mil respectively to reflect the timing of revenue recognition. We introduce FY22 net earnings forecasts at RM54.7mil. Our downgrade in earnings and FV is largely to reflect the lower margins for its existing and future launches.

• Titijaya's FY19 net profit of RM22.1mil came in below expectations at only 80% and 70% of our full-year forecast and full-year consensus estimates respectively.

• FY19 revenue and net earnings declined by 18.3% and 52.1% YoY due to the lower recognition and lower progress recognition from the completed H2O and the nearly completed Roseville @ Klang. However, current ongoing projects from Neu Suites @ 3rdNvenue, The Shore @ Kota Kinabalu, The Riv @ Riveria City have also contributed to current financial year earnings.

• Financial leverage remained stable despite a higher net gearing of 27% as compared with 26% YoY.

• On a positive note, the higher unbilled sales of RM475mil (QoQ: RM380mil) together with RM575mil strong new sales achieved in FY19 will provide earnings visibility for the next 2–3 years.

• 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 a total landbank of 208 acres, located mainly in Klang Valley with a GDV of RM12.4bil which provides 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 - 3 Sept 2019