Investment Highlights

• We are maintaining our HOLD recommendation on Titijaya Land (Titijaya) with a lower fair value of RM0.28 (from RM0.30) based on a 45% discount to its RNAV (Exhibit 2).

• We cut our FY20, FY21 and FY22 forecasts by 57%, 60% and 56% to RM18.9mil, RM20.5mil and RM24.1mil respectively to reflect the timing of revenue recognition. Our downgrade in earnings and FV is largely to reflect the lower margins for its existing and future launches.

• Titijaya's 1QFY20 net profit of RM2.9mil came in below expectations at only 7% of both our and consensus full-year estimates.

• 1QFY20 revenue and net earnings declined by 31.3% and 75.1% YoY respectively due to the lower recognition and lower progress recognition from the completed H2O and Mizu. In addition, the lower earnings were also due to the absence of one-time reimbursement of costs from Prasarana on the temporary occupation of land for development the LRT.

• Financial leverage remained stable despite a higher net gearing of 28.4% as compared with 27% QoQ.

• Titijaya launched Seiring Residensi in August 2019, which is phase one of its Damaisuria township project. Consisting of four towers, Seiring Residensi offers a selection of units with sizes ranging from 668 sq ft to 972 sq ft, with up to four bedrooms. Developed over four phases, Damaisuria will have a GDV of RM1.59bil, while the first phase Seiring Residensi will have a GDV of RM677mil.

• 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 - 2 Dec 2019