-  We maintain our BUY call on Titijaya Land with an unchanged fair value of RM3.30/share - pegged at a 25% discount to its NAV/share of RM4.40. Titijaya announced that its wholly-owned unit Titijaya Resources Sdn Bhd has entered into an agreement to raise its stake in Tenang Sempurna Sdn Bhd (TSSB) to 70% for RM70k.

-  TSSB had on 10 July 2014, received a provisional award for a joint-development agreement on a piece of land under Lot 282, Section 63, KL. From our channel checks, we understand that the said land sits on a ~5-acre plot located along Jln. Eaton and opposite Suria Stonor.

-  Based on our initial estimates, we expect this deal to lift Titijaya's fair value by ~8% or RM0.30/share to RM3.60/share, and bump up its GDV closer to RM10bil from ~RM7bil currently. Our key assumptions are: (I) ave. selling price of RM2,000 psf; (ii) plot ratio of 8x; (iii) efficiency ratio at 75%; (v) net usable area of ~1.2 mil sq ft; and (iv) development period of 8 years.

-  We leave our estimates unchanged for now pending a formal endorsement from the relevant authorities. The proposed development will likely be well received, given its strategic importance as one of the last few sizeable tracts of land remaining within KL's 'golden triangle'.

-  Our channel checks indicate that the average prices for residential units at the Four Seasons Place Kuala Lumpur is ~RM2,800psf (take up: ~76%). Local press reports indicate that penthouses at the nearby Banyan Tree and Harrods Hotel & Residences are priced at ~RM3,300 psf.

-  Equally, this latest move reflects Titijaya's first foray into the high-end residential market within KL city centre. The group may rope in a global hotel operator to brand its hotel block, and underpin the future take-up rates for its service apartments.

-  While Titijaya's share price has done well since its IPO last November, we believe that it still has more legs to go given the increasingly robust land banking and presales momentum. This should help narrow the steep 41% discount that the stock is trading vis-a-vis its NAV of RM4.40/share.

-  Even on existing locked in pre-sales of RM550mil, Titijaya is set to deliver c.RM95mil in FY15F (ending 30 June) vs c.RM68mil for FY14F, before rising further to RM123mil in FY16F. This translates into a solid-three year earnings CAGR of 30% with attractive FY14F-16F FD PEs of 8x-14x.

Source: AmeSecurities