- We maintain our BUY call on Titijaya Land with a lower fair value of RM2.72/share (from RM3.10/share previously) on a wider discount to its revised NAV (25% to 40%). This reflects our lower new property sales assumption for FY16F (from RM600mil to RM350mil) given the weaker sentiments prevailing on the property market.

- Titijaya reported FY15 results that were within our expectations. Net profit rose 13% YoY largely on good progress recognition on some of its key projects. For FY15, Titijaya declared a final single-tier DPS of 4.5 sen, or a net yield of 2%.

- Property revenue rose c.20% YoY to RM341mil. Key project contributors include Seri Alam Industrial Park (Phase 1 & 2) and Zone Innovations in Klang.

- Pre-tax margins were however a tad lower (32.6% in FY15 vs. 34% in FY14) as progress on some of its Klang-based projects that came with land acquired at lower prices many years ago are approaching the tail-end of its life cycles.

- Titijaya achieved close to RM500mil worth of new property sales in FY15 against c.RM450mil for FY14. Out of this total, we understand that its H2O development in Ara Damansara accounted for close to 60%.

- To-date, the first three blocks of H20 achieved an overall take-up rate of ~80%. The final block (Tower B) is set to be launched in FY16F (GDV: RM190mil).

- Rolling into FY16F, Titijaya will likely adopt a more cautious stance in focusing on its existing pipeline of projects rather than over-committing itself to drive presales growth amid a tougher operating environment.

- Furthermore, the group can opt to hold back launches for some of the upcoming developments it had secured on a JV basis until market conditions improve, given the relatively low holding costs involved.

- Key launches in the pipeline totalling RM353mil include Tower B of H2O, a low-rise apartment project in Cheras and the Emporia office units in Shah Alam. On the other hand, the more upmarket developments in Penang and Brickfields would likely only be launched in FY17F/18F.

- Titijaya’s fundamentals remain largely intact. Unbilled sales stood at a healthy RM732mil (~2.2x its FY15 property development revenue) with a strong balance sheet to boot (FY15 net cash position of RM7mil).

- The stock is currently trading at a steep 60% discount vis-a-vis its revised NAV/share of RM4.54.

Source: AmeSecurities Research - 28 Aug 2015