Period  2Q14 / 1H14

Actual vs. Expectations 1H14 core earnings of RM150m came within expectations, making up 53% of street and 50% of our FY14E estimates. Note this year, the group is registering unrealized FOREX gains arising from their London project. 1H14 sales amounted to RM1.25b (+39% YoY) as 2Q13 raked-up sales of RM750m (+50% QoQ). This is within our expectations, making up 56% of our FY14E Malaysia only sales target of RM2.20b. (Refer overleaf).

Dividends  None, as expected

Key Results Highlights QoQ, albeit a 7% decline in revenue, due to the completion of The Light Collection I last quarter, 2Q14 core earnings was flat at RM75m as property pretax margins expanded by 2.4ppt on recognition of higher-margin projects.

 YoY, 1H14 core earnings rose by 94% on the back of more billings given the 71% increase in topline.

Development margins improved by 3.2ppt due to billings from higher-margin projects like The Light and township projects (Bandar Utama@Sandakan, Seremban 2, Shah Alam 2, Nusa Duta@Johor). Its share base has also grown by 10% over the last six months due to warrant conversions (refer overleaf).

Outlook  Remaining new local project launches of c. RM1.3b include “affordable” products such as Rimbayu Phase 3 (cluster homes), Seri Riana Phase 2b, Pantai Sentral (Phase 1) while there will be some high-end ones like The Light Collection IV. The RM1.3b new launches do not include on-going projects. (Refer overleaf).

Change to Forecasts Immaterial changes to estimates (+1% for FY14E and 15E) due to higher interest income arising from the proceeds from warrant conversion. Unbilled sales of RM1.3b (RM2.0b if include JCE/associate projects) provide around one year of earnings visibility.

Rating Maintain OUTPERFORM

Valuation  The property sector has been affected by negative sentiment arising from the recent property market

tightening measures. Hence, we widen the FD RNAV discount rate closer to its average rate of 13% (none previously), while our FD RNAV remains unchanged at RM3.60. Thus, our TP is reduced to RM3.15 (RM3.60 previously). Nonetheless, we continue to like IJMLAND given its strong net cash position and are confident that the stock will continue to see strong demand due to its arsenal of affordable housing and landed residential projects.

Risks to Our Call Unable to meet sales targets. Delays in launches. Sector risks, including severe negative policies affecting property buyers/investors.

Source: Kenanga