- We initiate coverage on Titijaya Land with a BUY rating and a fair value of RM3.30/share – pegged to a 25% discount to our estimated NAV of RM4.40/share. Our fair value implies a PE of 13x on FY15F FD EPS.

-  Titijaya is an under-researched mid-cap developer that is experienced in sourcing value-accretive land deals, particularly development sites in mature residential neighbourhoods.

-  The group is under the stewardship of entrepreneurial major shareholder, Tan Sri Lim Soon Peng, who has a 61% stake and a strong appetite for growth.

-  Existing locked-in presales of RM550mil alone should see Titijaya delivering a net profit of c.RM95mil in FY15F (ending 30 June) vs. an estimated RM68mil in FY14F.

-  For FY16F, we are forecasting net profit to expand by another 29% to RM123mil. Hence from the earnings standpoint, Titijaya is trading at an attractive FY15F PE of only 9x when compared to its larger peers’ 15x. This is backed by its solid three-year forward earnings CAGR of 30%.

-  Titijaya is currently developing a modern retail mall located in the highly populated suburb of Shah Alam. When completed in 2017, it will have a significant 1.3mil sq ft of net floor area (NFA). The said mall should underpin the take-up rate of its residential presales and raise pricing points.

-  We sense that the group may opt to unlock the deep value of its mall, and recycle its capital to strengthen its balance sheet for more aggressive land banking initiatives ahead. Based on our estimated selling price of RM1,000 psf, the mall is worth about RM1.3bil, which is more than its current market cap of RM847mil.

-  In just six months since its IPO debut in November 2013, Titijaya has announced two prolific land deals in Brickfields and Batu Maung. Set to be launched in FY16F, both projects that are sited on prime land are set to double Titijaya’s GDV to ~RM7bil; this will anchor its increasingly robust pre-sales pipeline.

-  TItijaya’s balance sheet remains healthy with an FY14F net gearing ratio of 0.1x, which suggests ample room for more NAV-accretive land banking moves or projects. At the same time, the group could be looking to pay out c.20% of its profits as dividends. Maiden dividends are expected in 4QFY14. 

Source: AmeSecurities