Dijaya’s 1QFY13 net profit of MYR42.8m came in below expectations. Earnings growth during the quarter was driven by the sale of landbank, aggressive property sales and increased contribution from the property investment segment. We expect more land disposals to contribute to earnings going forward as Dijaya continues with its de-gearing exercise. Fair value has now been raised to MYR2.34. Maintain Buy.

- Below expectations. Dijaya’s 1QFY13 core net profit of MYR43.8m (255.1% y-o-y; -27.2% q-o-q) came in below expectations on an annualised basis. Y-o-y growth was driven by: 1) landbank sales; 2) aggressive property sales; and 3) increased contribution from the property investment segment. The gains from land sales at its Tropicana Bayou Balakong and Desa Aman Puri sites (as part of its de-gearing exercise) boosted 1Q13 PBT by MYR58.1m. Dijaya’s weaker sequential growth was mostly due to the timing of progress billings. As a result of asset disposals, Dijaya’s net gearing has lowered to 0.68x (from 0.80x). 

- Aggressive property sales and land disposals sustaining growth.  Dijaya recorded total sales of about MYR254m in 1QFY13. However, management has indicated that YTD sales have achieved almost MYR500m. The sales were mainly contributed by its Klang Valley projects (Tropicana Grande and Tropicana Avenue) as well as its maiden Danga Bay project. We believe that Dijaya is still on track to meet our FY13 sales target of MYR2.0bn. Its property investment segment has also fared well, driven by improved yields for Tropicana City Mall and Office Tower.  

- De-gearing exercise continues.  Several projects are lined up to be launched in 2H2013, including two projects in Penang. Dijaya has earmarked several land parcels for sale in the near future, with expected gross proceeds of MYR510m. It could also be looking to sell off about MYR3bn worth of non-core assets to further pare down its gearing. The company has targeted to lower its net  gearing to 0.5x over the next 12 months.

-  Maintain BUY; fair value revised to MYR2.34. Although our earnings forecasts are unchanged, we have raised our fair value to MYR2.34 (from MYR2.08) after revising some of our RNAV assumptions and assigning a lower discount to RNAV of 25% (from 30%). Maintain BUY.

Source: RHB