We raise IJMLD’s fair value to RM3.42. IJMLD is the Malaysia property play and we expect the stock to gradually garner more premium. IJMLD is currently a laggard. The recent sector re-rating has largely neglected the growth potential of IJMLD, given its current PE of only 13x vs. previous upcycle’s PE of 18-19x. Following the highly successful debut of Rimbayu last month, the RM4bn Pantai Sentral Park will be the next earnings kicker.

IJMLD to garner more premium. We choose IJMLD over SP Setia as the Malaysia property play, given that IJMLD has a wide presence in most of the key states in Malaysia, whereas SP Setia’s current product portfolio has skewed towards the overseas markets. SP Setia could also be clouded with some uncertainties with the recent changes in leadership direction. Being the leader in the Malaysia property market, we believe IJMLD will gradually accumulate its premium valuations.

Sentiment to spillover. The recent positive sentiment on the sector is getting more widespread, even amidst the crucial election period. We see any potential selldown a good buying opportunity, as the favourable sector fundamentals are supporting the upcycle and valuations. The recent sector re-rating has largely underestimated the growth potential of IJMLD. The stock is currently trading at a PE of only 13x, still some 30% below the previous upcycle PE of 18-19x in 1H11.

Pantai Sentral Park the next earnings kicker. Pantai Sentral Park will be another highly anticipated project for IJMLD in the Klang Valley. The project has an estimated GDV of RM3-4bn, comprising low and high-rise developments surrounded by 200 acres of green lung. Depending on the election outcome, the project could benefit from the proposed MRT Line 2, which could pass through Pantai Dalam. If this materialises, the GDV of the project could be boosted substantially.

Forecasts. Unchanged.

Reiterate Buy. IJMLD is a stock that we like apart from Sunway and IJMLD. In tandem with the sector upcycle, we raise our FV to RM3.42, at its RNAV/share.

Source: RHB