Period  2Q15/1H15

Actual vs. Expectations 1H15 core earnings* of RM152m came in below expectations, making up 40% of consensus and 41% of our full-year estimates. Our property billings number was slightly more aggressive while margins came in softer than expected as we saw unexpected segment losses from its nondevelopment business.

 Sales in 1H15 was RM900m (1H14: RM1.25b), driven mainly by local sales. It appears the group is proportionately behind its internal, and our initial, target of RM2.2b (local only) since 9M15 only made up 41% of target.

Dividends  None, as expected.

Key Results Highlights  QoQ, revenue was down marginally (-1%) while EBIT decreased by 9% as non-development segment saw losses, which eroded the effect of steady development margins. However, core earnings rose slightly by 3% thanks to a reduction in net interest cost by 108%.

 YoY, 9M15 core earnings was flattish (+1%) on reasons similar to above, in addition to higher effective tax rates of 27.8%.

 Net gearing increased to 0.12x from a net cash position a year ago.

Outlook  The company acknowledges that the property market is challenging and is now guiding FY15E sales of RM2.0b (total); mainly driven from Malaysia. Our earlier guidance was RM2.2b which is also the assumption we have used in our FY15E estimates. Key launches for 2H15 are Rimbayu Phase 5, Nasa City Phase 1, Pantai Sentral Phase 2 and shoplots @ Seremban.

 Investors can expect the privatisation process to come to an end by 1QCY15. Its parent’s EGM will be held in Dec-14 while IJMLAND’s EGM will be in Jan-15 and ES/IA will be distributed to shareholders beforehand.

Change to Forecasts  Lowering FY14-15E core earnings by 9%-12% (refer overleaf). Unbilled sales of RM1.8b (RM2.1b including JVs) provide one-year visibility.

Rating Maintain ACCEPT OFFER

Valuation  No changes to our TP which reflects the Offer Price of RM3.55. Note that the Offer Price comprises 0.5

IJMCORP share plus 20 sen cash payment for every 1 IJMLAND share. At this juncture, investors can exploit arbitrage opportunities via IJMLAND based on last price of IJMLAND of RM3.32 and IJMCORP of RM6.70.

Risks  Unable to meet its sales target. Sector risks, including further negative policies.

Source: Kenanga