Highlights

We met with the management of Titijaya (TTJ) and came away feeling positive about its prospects:

Focused on mid-market segment. >50% of its ongoing projects are in the residential segment, which are priced from RM400-900k.

Experienced management. The group is led by the highly experienced Tan Sri Lim Soon Peng (TSL), who has a 61% stake and more than 30 years of experience in the property industry. Two of TSL’s children are board directors and actively involved in management, which provides management continuity.

Spreading its wings. Since 2001, TTJ has completed more than 3,000 properties in Klang and Subang Jaya worth RM1.14bn cumulatively. New projects in Ulu Kelang, Ara Damansara, Brickfields and Penang will serve to provide earnings clarity through 2020.

Rapid expansion of landbank. TTJ has close to doubled its GDV from RM4.2bn to RM8.2bn since its listing in Nov 2013, with its 70:30 Brickfields JV with Bina Puri (RM1.4bn GDV) and Penang land acquisition (RM2.6bn GDV). We believe TTJ could strike more value-accretive land deals in the coming months, likely to be in Klang Valley or Penang.

Conducive balance sheet, with net gearing below 0.1x post-listing, giving it scope to pursue land deals. Management is looking at possible 20% dividend payout ratio although no formal policy has been set.

Building up investment asset portfolio. TTJ is developing a 1.35m sft retail mall within its Trio project in Shah Alam, to be completed in 2017. We estimate the mall could add RM1.45 per share to its RNAV, if we ascribe an RM1,000 psf valuation to the mall.

Under-researched property stock, with only one broker covering it at the moment, but already included in the FBM KLCI Small Cap index.

Risks

Slower than expected takeup for its new launches.

Forecasts

We project robust earnings growth of 22-31% for FY14-16, with its RM7.3bn pipeline of 9 new projects commencing in 2014-15.

Rating

N/A

Positives: Focused on mid-market projects in matured areas, which should do well in the current environment.

Negatives: Lack of a sizeable flagship project in highgrowth areas (unlike Matrix in Seremban or Tambun Indah on Penang mainland).

Valuation

Our RNAV per share is RM4.24 and our TP is RM2.97 (30% discount to RNAV to reflect relatively low liquidity and free float).

Source: Hong Leong Investment Bank Research - 11 Jul 2014