Result

• Results within our expectation. Titijaya Land Berhad (Titijaya) recorded a net profit of RM21.7m in its 3QFY18 results, up 13.0% yoy and 8.5% qoq. In 9MFY18, the Group posted RM62.3m in net earnings, which increased 4.5% yoy. The result is in line with our expectation, accounting for 73% of our full year net earnings estimate.

Comment

• Stronger yoy results. The Group achieved better yoy performance in 3QFY18 on the back of higher revenue, +13.5% yoy mainly driven by progress works in H20 project, project completion in Primrose and the proceeds from partial land compulsory acquisition in Penang for the purpose of road widening works. Furthermore, the lower effective tax rate during the quarter (3QFY18: 22.1% vs 3QFY17: 34.0%) also underpinned its bottom line amid drop in PBT, -6.5% yoy as a result of higher administrative expenses incurred for professional fees in respect of corporate collaboration, staff cost and corporate exercise. Similarly, its 9MFY18 results were boosted by higher revenue (+26.0% yoy) and lower effective tax rate (9MFY18: 26.9% vs 9MFY17: 28.2%) in spite of higher operating expenses which offset the gain.

• Better qoq. The Group’s top line tumbled 44.3% qoq due to half-yearly rental of RM7.9m received in 3QFY18 for temporary occupation and usage of its land in Shah Alam by LRT 3 contractors. Nevertheless, Titijaya managed to chalk up higher qoq results mainly attributable to commendable margins achieved (GP margin: +21.4ppts, PBT margin: +14.6ppts) with better margins on its completion works in Primrose, and H2O project progress recognition.

• 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

• No change to our respective FY18F and FY19F net profit forecasts of RM85.3m (+11.3% yoy) and RM91.2m (+6.9% yoy).

Valuation/Recommendation

• Maintain BUY on Titijaya with a lower target price of RM0.64 (RM0.76 previously), after widening our discount to fully-diluted RNAV/share of RM2.55 to 75% (from 70%) to better reflect prevailing weak market sentiment towards property counters. Our revised target price now implies 10x FY19F PE.

• 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 - 1 Jun 2018