Investment Highlights

• We revised our FY18-20F forecasts downwards by 2.6%, 15.7% and 19.2% respectively and reduced our FV by 31% to RM0.50 (from RM0.73) based on a 40% discount to its RNAV (Exhibit 3). At present, Titijaya is trading at an undemanding forward FY18-20F PER of below 7x. Despite a lower FV, the stock offers potential upside of more than 30%, hence, maintaining our BUY recommendation.

• We are imputing a lower revenue growth due to a higher loan rejection rate and weaker take-up rates amidst the prolonged slowdown in the local property market.

• We expect Titijaya to register net earnings of RM80.3mil, RM83.6mil and RM88.5mil for FY18-20F respectively.

• At present, Titijaya has 5 ongoing projects, namely H20 @ Ara Damansara (mixed development – GDV RM916mil), 3rdNvenue Phase 1 @ Embassy Row, KL (Service suite – GDV RM514mil), The Shore @ KK, Sabah (mixed development – GDV RM534mil), Taman Seri Residensi Phase 2B @ Klang (landed residential – GDV RM41mil) and Park Residency Phase 1 @ Cheras (landed residential – GDV RM85mil).

• Meanwhile, the unbilled sales of RM360mil-370mil together with a slew of new launches in FY18-FY19 will boost its revenue in the near term.

• 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 GDV of RM12.4bil, provides good earnings visibility and will drive the company’s growth going forward.

• Nonetheless, we remained cautious on the property sector due to: (1) the generally still elevated home prices; (2) the low loan-to-value (LTV) offered by banks; and (3) house buyers' inability to qualify for a home mortgage due to their already high debt service ratios (DSR). In addition, the still subdued consumer sentiment against a backdrop of rising cost of living and elevated household debts is holding consumers back from committing themselves to the purchase of big-ticket items like a house. However, we do see a bright spot in the affordable segment.

Source: AmInvest Research - 25 Jun 2018