Result

• Results slightly above our expectation. Titijaya Land Berhad (TL) recorded a net profit of RM17.0m for its 4QFY17 results, up 14.1% yoy but down 11.5% qoq. For FY17, the Group chalked up net earnings of RM76.6m, which was 12.2% higher than a year ago. The results exceed our full year net earnings by 7% and 10% of consensus on the back of higher-than-expected progress billings.

Comment

• Stronger FY17. TL achieved better bottom line in 4QFY17, +14.1% on the back of higher top line, +14.5%. For the full year results, the Group’s net profit managed to expand by 12.2% from FY16 thanks to cost savings from certain projects in which some costs were front loaded coupled with recognition of liquidated ascertained damages (LAD) net income of RM5.8m as its GP and PBT margin grew by respective 2.9ppts and 6.1ppts, amid weaker revenue achieved, down marginally by 4.8%. During the year, projects such as 3Elements, Seri Alam Phase I & II, Zone Innovation and H2O underpinned TL’s topline growth.

• Lower qoq as expected. On qoq basis, the weaker performance of the Group was mainly attributable to margins slide (GP margin: -23.2ppts; PBT margin: - 18.8ppts) with the completion of high-margin product, namely the sales of industrial factory, Zone Innovation in 3QFY17 despite revenue soared by 73.2%.

• New sales accomplished. TL achieved RM355m new sales in FY17, which exceeded its target of RM300m. Major contributors were H2O, 3Elements, Embun, Klang projects and factory sales. Going forward, the Group aims for RM500m new sales in FY18. Meanwhile, the Group chalked up unbilled sales of RM409m as of todate, which underpins its topline visibility of a year or equivalent to 1x FY16’s revenue.

• RM1.8b new launches slated for FY18, mainly targeting mass market segment. We understand that 70% of the new launches will be priced below RM600k/unit in order to cater for affordable housing which is more prevalent, while the remaining of 30% will be priced above RM700k/unit. TL targets to launch four upcoming new projects in FY18, with three in the Klang Valley: a) 3rdNvenue @ Jln Ampang Phase 1 with GDV of RM493m. Official launch will be in September and

we understand that the Group is currently converting the bookings into S&P signing (fully booked with 30% conversion rate), with soft launch in early this year. b) Damansara West Phase 1 with GDV of RM361m which will be launched next year; c) Riveria @ KL Sentral Phase 1 with GDV of RM317m which is targeted to be launched in end of this year; d) The Shore in Kota Kinabalu, Sabah with GDV of RM575m. The project was launched in mid July 17 and we gather that response is encouraging with 40% bookings. On top of that, TL is also banking on its on-going projects, such as H20 (remaining one block), Emery@Kemensah, Park Residensi@Cheras, and Seri Alam worth a total GDV of RM1.0b to further strengthen its sales.

• Embarking on asset monetisation. TL has successfully reduced its inventory level from RM175m as of FY17 to RM86m as of today. The Group monetises the value of its current landbank via various methods such as non-recourse financing, sale-leaseback transactions and spinoffs.

• Strategic tie-ups with the government agencies for the development of prime land. The Group foresees finalising its earlier plans of land swap deals and development of two property projects strategically located in KL city centre by FY18 or CY6/18. Should the deals materialise, TL will be required to help the Ministry of Education to construct six school buildings in exchange for a 3.7-acre land in Bukit Bintang as well as the development of a 4.8-acre land in Jalan Stonor which originally belonged to Lembaga Getah Malaysia. Furthermore, we believe the Group is in the midst of concluding more strategic tie-ups in the likes of transit oriented developments (TOD) in the vicinities of mass rapid transit (MRT) stations.

Earnings Outlook/Revision

• We revise upwards our FY18F net earnings by 5.2% to RM83.0m (+8.4% yoy) after fine-tuning our work-in-progress. Meanwhile, we keep our net profit forecast for FY19F unchanged at RM90.4m (+8.9% yoy). Our new sales assumptions for FY18F/FY19F are RM500m/RM600m.

Valuation/Recommendation

• Maintain BUY on Titijaya with an unchanged target price of RM2.06, based on 35% discount to its fully-diluted RNAV/share of RM3.17.

• We believe the worst is over for the stock and advise investors to accumulate the share as the Group is able to fast track its projects execution to ride on the property recovery. This is backed by its unique business model, landbanking strategy and marketing efforts in targeting mass market segment.

Source: JF Apex Securities Research - 5 Sept 2017