Investment Highlights

• We raise our FY18-19F net profit forecasts by 14.4% and 22.1% respectively, but cut our FY18-19F FD EPS forecasts by about 60% each. We trim our FV by 5% to RM1.91 (from RM2.01) but maintain our BUY call.

• The upgrade in our net profit forecasts is largely to reflect some RM65.3mil government compensation, particularly, the half-yearly rental of RM7.95mil for three years from Nov 2017. The compensation arises from the temporary occupation and usage of Titijaya's 16-acre land in Shah Alam by contractors during the construction of LRT3.

• On the other hand, the downgrade in our FD EPS forecasts is to reflect the almost tripling in Titajaya's FD share base from 410mil to 1.1bil following: (1) the issuance of 79.7mil new shares at an issue price of RM1.45/share for recent land acquisitions; and (2) the issuance of 615mil Irredeemable Convertible Preference Shares (ICPS) at an issue price of RM0.165/share.

• The ICPS is convertible into new Titijaya share either by way of: (1) the ICPS option, i.e. ten ICPS into one share; or (2) the cash option, i.e. one ICPS + RM1.485 cash for every one share. Thus far, we understand that 33mil ICPS have been converted into new shares by way of the cash option.

• Titijaya still has one outstanding corporate exercise, namely, the subdivision of its shares from one to two, which will increase its FD share base further to 2.2bil.

• We continue to like Titijaya for its focus and strength in the affordable segment. Its earnings visibility is strong backed by RM409mil unbilled sales and a FY18 sales target of RM500mil, vs. RM355mil it achieved in FY17.

• FY18 sales will be driven largely by RM1.75bil planned launches during the year comprising The Shore @ Kota Kinabalu (mixed development) (GDV: RM575mil), 3rdNvenue @ Jalan Ampang (Phase 1) (mixed development) (GDV: RM493mil), Riveria KL Sentral (Phase 1) (mixed development) (GDV: RM317mil), and Damansara West, Bukit Subang (Phase 1) (township) (GDV: RM361mil).

Source: AmInvest Research - 2 Nov 2017