Result

• Results within expectation. Titijaya Land Berhad (Titijaya) recorded a net profit of RM20.6m in its 1QFY18 results, up 3.0% yoy and 21.2% qoq. The result is line with our expectation and consensus as 1Q net earnings constitute 25% and 23% of our and the market’s full year net earnings forecasts respectively.

Comment

• Better yoy…..... Titijaya chalked up better bottom line in 1QFY18 thanks to stronger margins achieved (PBT margin: +2.2ppts yoy, +4.9ppts qoq) amid weaker top line (-4.2% yoy, -15.6% qoq). The resilient yoy performance was attributable to lower marketing expenses as the Group repositioned its property launches to address the changes in market demand coupled with lower administrative expenses in relation to untenanted investment property.

• ………as well as qoq. Also, Titijaya recorded a commendable qoq result thanks to an increase in GP margin (1QFY18: 34.1% vs 4QFY17: 29.4%) mainly resulted from project H2O with higher margin as compared to the completed project 3Elements in the previous immediate quarter. Furthermore, the Group posted a higher PAT qoq due to the project launches deferment in respect of prevailing soft market condition.

• New sales target of RM500m on the back of RM1.8b new launches slated for FY18, mainly targeting mass market segment. The Group aims for RM500m of new sales in FY18. We understand that 70% of the new launches will be priced below RM600k/unit in order to cater to affordable housing which is more prevalent, while the remaining 30% will be priced above RM700k/unit. Titijaya plans to launch four upcoming new projects in FY18, with three in the Klang Valley:

a) 3rdNvenue @ Jln Ampang Phase 1 with GDV of RM493m, which was officially launched in September 17;

b) Damansara West Phase 1 with GDV of RM361m which will be launched in CY18;

c) Riveria @ KL Sentral Phase 1 with GDV of RM317m which is targeted to be launched in end of CY17;

d) The Shore in Kota Kinabalu, Sabah with GDV of RM575m which was launched in mid July 17.

On top of that, the Group 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.

• Teams up with reputable Japanese developer to enhance value of existing project. Earlier, Titijaya entered into a conditional share subscription agreement with Japan-based Tokyu Land Corp for a subscription consideration of RM47m. The proposed subscription is to enhance the development of an on-going project in H2O in Ara Damansara by co-developing and designing a serviced apartment named Mizu Residence (300 units with a total built-up area of 234,000sf) worth GDV of RM300m. We are positive with this latest development as the Group could capture more market share with its JV party’s marketing efforts, aiming for more foreign buyers.

Earnings Outlook/Revision

• We keep our net profit forecasts for FY18F and FY19F unchanged at respective RM83.0m (+8.4% yoy) and 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 advise investors to accumulate the share as we believe the Group is able to fast track its projects execution to ride on the recovery in property sector. This is backed by its unique business model and landbanking strategy of scouting for joint venture and land-swap project opportunities with reputable government agencies and other synergistic partners, coupled with its aggressive and innovative marketing efforts in targeting mass market housing segment.

Source: JF Apex Securities Research - 4 Dec 2017