Valuation / Recommendation

We have a SUBSCRIBE recommendation on KTI Landmark with an FV of RM0.36 based on 15.0x FY25F EPS, in line with comparable peers’ valuation. KTI Landmark offers an attractive investment prospect with its growth opportunities in Sabah's property market, driven by its unique partnership with LPPB and strong project pipeline, which includes a mix of premium property and affordable housing developments.

Investment Highlights

Robust project pipeline. KTI Landmark has ongoing projects with a total GDV of RM2.2bn, which includes The Logg (RM1.0bn), Alam Mesra (RM863m) and the Sandakan project (RM108m). Of the three, only Sandakan is an LPPB contract, whereas the other two projects are owned by the group. Its current crown jewel, The Logg, is a 5-acre mixed development project comprised of 2 blocks of 28-storey luxury condos, 1 block of 28-storey apartments, a 4-star hotel and 5 levels of commercial buildings (retail+offices). Meanwhile, Alamesra is KTI Landmark’s latest mixed development project (launched in late 2023), which is largely made up of 42 units of superlink terrace and 5 blocks of 39-storey apartments.

Decent unbilled sales. As of April 2024, KTI Landmark's unbilled sales amount to RM272m, more than half of which were contributed by The Logg project (RM156m sold). This level of unbilled sales should be enough to provide good earnings visibility for the group over the next two years. The Shorea & Astoria luxury condo portion of The Logg project is only 33.6% sold, because marketing activities were solely focused on Parkhill apartments previously (90% sold). Priced between RM800 and RM1,000 per sq ft, The Logg's luxury condo take-up rate is slower than other KTI Landmark’s affordable housing projects, but its prime location in Luyang is expected to drive long-term sales in our view.

Diversifying into hotel and property management: KTI Landmark is expanding into the hotel industry with Avani Luyang @ The Logg (GDV: RM270m), managed by Minor Hotel Group Ltd under the “Avani” brand. Additionally, the group also plans to manage the tenancy of the commercial building within The Logg. We anticipate that the government's Visit Malaysia 2026 initiatives in Sabah, along with the expertise of the luxury hotel operator managing Avani, will boost future hotel occupancy rates.

Risk factors: (1) Dependency on LPPB (2) Risk of project delays (3) Challenge of acquiring sizeable landbanks (4) Dependency on foreign labour.

Source: Mercury Securities Research - 30 May 2024