Investment Highlights

• We maintain our BUY call on Titijaya Land (Titijaya) with an unchanged fair value of RM2.01 per share, based on a 30% discount to its RNAV. We make no changes to our FY18F-19F earnings forecasts, and introduce our FY20F numbers.

• Titijaya’s FY17 net profit grew 12.3% YoY to RM76.7mil. This was above expectations, accounting for 113% of our full-year forecast and consensus. No dividend was declared, as expected.

• The positive performance was contributed mainly by the higher recognition from its ongoing property development projects, namely H2O and 3Elements. Despite revenue contracting 4.8% YoY to RM380.8mil, the group still managed to grow its earnings due to better costs management.

• Titijaya registered total new sales of RM355mil in FY17, exceeding its target of RM300mil, supported by its ongoing projects, which we believe is commendable in view of the challenging market condition. It launched RM367mil GDV of projects in FY17.

• Titijaya’s earnings visibility is anchored by its RM409mil unbilled sales as at end-FY17.

• Titijaya’s proposed renounceable rights issue of up to 614.99mil irredeemable convertible preference shares (ICPS) on the basis of three ICPS for every two existing shares (3-for-2), with a conversion ratio at either 10 ICPS into one share, or a combination of 1 ICPS and cash payment of RM1.485 for one share, will provide Titijaya with a stronger cash pile to fund the projects that it has lined up and to source for future landbank.

• With a continued focus on its core market of affordable segment, which we expect to remain resilient in the challenging market condition, management has lined up new launches with RM1.75bil GDV in FY18. These are made up of 5 new projects, namely The Shore @ Kota Kinabalu (mixed development), 3rdNvenue @ Jalan Ampang (mixed development), Riveria KL Sentral (mixed development), and Damansara West, Bukit Subang (township), It has set a FY18 sales target of RM500mil.

• As for the long term, it has around RM13.85bil worth of GDV in projects expected to be launched in the next few years, which will keep it occupied until 2027 and provide a sustained earnings visibility to the group.

Source: AmInvest Research - 5 Sept 2017