What’s New

• Company visit. We met the management of Titijaya Land Berhad (Titijaya) recently and came back feeling neutral on the Group’s prospects. We understand that its take-up rates for new launches, namely 3rdNveue and The Shore remain subdued due to high loan rejection rates amid overwhelming bookings received since its soft launch last year. The Group also delayed a few project launches to FY19 (2HCY18). Nevertheless, we keep our BUY call on Titijaya banking on better outlook in the longer term, underpinned by a slew of new launches in Klang Valley with product offerings fetching affordable pricings which are below RM500k.

Comment

• 1HFY18 new sales lag behind its target. Titijaya achieved RM196m sales in 6MFY18 which accounts for 39% of its FY18 sales target of RM500m on the back of RM1.4b targeted GDV of launches. Majority of new sales were contributed by its on-going project, namely H2O (Block C & D). Moving forward, we expect the Group to book in new sales for 3rdNveue in KL and The Shore@KK (Sabah) which are currently having 20-30% take-up rates. Other on-going projects such as Taman Seri Residensi Phase 2B (Semi-D), Klang and Park Residency@Cheras (Vila) are also expected to contribute to new sales for this financial year. As of 1HFY18, Titijaya recorded RM380m unbilled sales, which underpins its topline visibility of a year or equivalent to 1.0x FY17 revenue.

• New launches in the pipeline for FY19. The Group targets to launch a few projects totalling RM826m GDV in FY19 (2HCY18) which include: a) Damai Suria Phase 1 serviced apartment (previously known as Damansara West) with an estimated GDV of RM168m, b) 3rdNveue@KL Phase 2 serviced apartment with an estimated GDV of RM338m, and c) Riveria City@KL Sentral Phase 1 serviced suite with an estimated GDV of RM320m. We gather that the Riveria City project (70% stake) has received encouraging response with 500 units out of 800 units being booked during pre-launch due to its strategic location in KL Sentral, easily accessible to public transportation (TOD development) and relatively affordable pricing of average RM300-400k/unit (built up of 250sf with over RM1kpsf).

Earnings Outlook/Revision

• We increase our FY18F and FY19F net profit forecasts marginally by respective 2.8% and 0.9% to RM85.3m and RM91.2m after factoring in the half-yearly rental of RM7.9m (booked in Nov 2017 and the next payment will be in May 2018 which will last for three years) from Prasarana for the temporary occupation and usage of its 16-acre land in Shah Alam by LRT3 contractor and at the same time lowering our new sales assumptions and progress billings.

Valuation/Recommendation

• Maintain BUY on Titijaya with a lower target price of RM0.76 (RM0.94 previously), based on a wider discount of 70% (from 63%) to its fully-diluted RNAV/share of RM2.55 in view of current cautious market sentiment on property counters. Our revised target price also implies 12x FY19F PE.

• Despite cut in fair value of the stock, we continue to favour the Group in the long run as we believe the Group is able to fast track its projects execution to ride on the gradual recovery of property outlook. 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, as well as its aggressive and innovative marketing efforts in targeting mass market housing segment.

Source: JF Apex Securities Research - 25 Apr 2018