Period  3Q15/9M15

Actual vs. Expectations  9M15 core net earnings* of RM224m came below expectations, as it accounted for 62% of street’s FY15E and 66% of ours. The negative variance was largely due to weaker-than-expected billings.

 9M15 sales of RM1.3b is deemed behind schedule as it made up 65% of our FY15E target of RM2.0b.

Dividends  None, as expected.

Key Results Highlights  QoQ, reported earnings was up by 34% due to remeasurement gains on investments of RM17.2m from Larut Leisure Enterprise (HK) Ltd. Excluding the oneoff item, core earnings was lower by 7% as the quarter saw more contributions from its 60% owned Rimbayu which resulted in higher MIs.

 YoY, 9M15 core earnings declined by 7% due to similar reasons mentioned above. Notably, net gearing has increased to 0.19x from 0.03x a year ago.

Outlook  The company acknowledged that the property market is challenging and rather take a conservative stance to ensure cashflow sustainability. These challenges are felt before GST implementation, implying that the current soft property market could worsen for the sector.

 Key launches on-going and new 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 Apr-15. The privatisation has received shareholders approvals from both parties and is now pending high-court sanctions of the exercise.

Change to Forecasts  Trimming FY15-16E core earnings by 2%-3% as we lower our corresponding sales assumptions by 10%- 5% to RM1.8b-RM1.9b. Unbilled sales of RM1.8b provide close to one-year visibility.

Rating Maintain OUTPERFORM (from AO)

Valuation  Our previous TP 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). Since both parties have received shareholders’ approvals, we switch our CALL from ACCEPT OFFER (AO) to OUTPERFORM and our TP is now based on arbitrage opportunities at last price as long as one: (i) is bullish on IJMCORP which is inline with our inhouse construction analyst (refer to IJMCORP RN) (ii) requires cheaper entry points. At this juncture, investors can exploit the arbitrage opportunity of 18 sen buy buying IJMLAND based on last price of RM3.70 vs. IJMCORP of RM7.18.

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

Source: Kenanga