Titijaya  Land  continues  to  thrive  after  its  listing  in  Nov  2013.  Future earnings  would  be  underpinned  by  its  pipeline  launches  of  about MYR6.7bn in hotspots such as Shah Alam, KL Sentral and Penang. Its higher-than-average gross margins of about 35-40% (industry average: 20-30%) would also help to buoy growth.  The stock could be valued at between MYR3.24 and MYR3.47, based on a 25-30% discount to RNAV.

• Future  growth  to  be  underpinned  by  total  potential  GDV  of MYR6.7bn.  Titijaya Land (Titijaya), a Klang  Valley-based developer, has a  well-entrenched  position  in  the  Klang  and  Subang  enclaves.  Future growth  prospects  are  strong,  given  its  steady  pipeline  of  launches  of projects worth MYR6.7bn and its higher-than-average gross margins of about 35-40% (industry average: 20-30%). It has also been proactive in expanding its landbank, typically acquiring land at below market prices. Since its listing in Nov 2013, it has acquired land parcels measuring 4.6 acres in KL Sentral and 20.4 acres in Batu Maung, Penang.
• Broadening its horizons. The company is now looking for opportunities outside of the Klang Valley. In May, it announced that it entered into a conditional sale and purchase agreement for 20.4 acres leasehold land in  Batu  Maung,  Penang  for  a  total  considera tion  of  MYR126m. Management is guiding for a sizable GDV of MYR2bn for this site.  We believe  that  this  project  could  garner  a  favourable  response,  given  its proximity to the Penang Second Bridge as well as the possible spillover effect from the catalytic investments in the Penang mainland.
• Managing price expectations through low land costs. Going forward, Titijaya would likely be able to maintain its gross margins of about 35-40%  despite  the  rising  costs  environment,  which  is  expected  to  be further exacerbated by the goods and services tax (GST) taking effect in in  April  2015.  Titijaya  has  been  able  to  sustain  its  high  gross  margins largely due to its strategy of procuring land at low costs. Currently only two  of  its  projects  –  Zone  Innovation  Park  and  Mutiara  Residences  -have higher land cost (more than 20% of expected GDV). Management will continue with this strategy for its future landbank acquisitions.
• Valuations. We believe that there is still some embedded value yet to be unlocked.  Future  earnings  growth  will  be  driven by  MYR550m  unbilled sales,  MYR700m  sales  target  for  FY15  and  its  proactive  landbank replenishment. If we were to apply a 25-30% discount to our estimated RNAV  of  MYR4.62  (in  line  with  our  valuation  for  other  mid-tier developers), Titijaya could be valued at MYR3.24 to MYR3.47.

Company  overview.  Titijaya  was  incorporated  in  1997  under  the  name  NPO Development. The company was founded by Tan Sri Dato’ Lim Soon Peng, who is the managing director, and his son Mr Lim Poh Yit, who is the CEO. The company has a proven track record, having  successfully developed more than 2,500 units of properties  with  a  total  GDV  of  about  MYR1.1bn.  In  Nov  2013,  it  was  successfully listed  on  Bursa  Malaysia  at  MYR1.50  per  share,  and  to  date  its  share  price  has appreciated by about 67%. Post listing, it has so far launched  projects with a GDV of MYR942m, the bulk of it coming from its highly-anticipated project  –  H2O in Subang Jaya (GDV: MYR750m).

Titijaya’s developments have been largely concentrated within the Klang Valley area. Its position is well-entrenched in the Klang  and Subang enclave. The company has started to broaden its horizons and is looking for opportunities outside of the Klang Valley.  Since  November,  it  has  acquired  two  new  pieces  of  landbank  -  a  4.6-acre piece of land in KL Sentral and 20.4 acres of leasehold land in Batu Maung, Penang.Future growth to be underpinned by total  potential GDV of MYR6.7bn.  Titijaya’s future  growth  prospects  are  strong,  given  its  steady  pipeline  launches  of  about MYR6.7bn, which is expected to last until 2021. About 49% of its GDV is expected to be  contributed  by  its  projects  in  Klang  and  Subang.  Management  is  guiding  for  a sizable  GDV  of  MYR2bn  from  the  land  in  Penang.  Going  forward,  the  company  is expected to continue concentrating more on the residential and commercial sectors, although  it  will  still  be  rolling  out  some  industrial  properties  in  its  Zone  Innovation 
Park at Sungai Kapar Indah, Klang. There are also plans to construct a retail mall as part of its mixed development project in Trio, Shah Alam.

Targeting  total  launches  of  more  than  MYR3bn  in  the  pipeline  for  FY15-16. Titijaya continues to thrive post-IPO. The take-up rates for its ongoing projects range between 29% and 100%. The high-end landed housing project in Embun Kemensah, Selangor is seeing slower take-up. Management has shared its plans to launch up to MYR3.3bn  worth of projects over the next 24 months. FY15’s targeted launches of MYR1.56bn  mainly  include  the  Klang  Sentral  service  apartment  project  (GDV: MYR700m) as well as the maiden launch of Trio, which is valued at MYR512m. Its MYR700m sales target for FY15  is mainly underpinned by its estimated sales from H2O. Titijaya will continue to provide a mix of high-end and affordable products going forward.

In order to widen its target market, it has priced its upcoming Klang Sentral units at below MYR400k to attract first-time house buyers eligible for the Government’s First Home  Scheme.  Under  the  scheme,  eligible  buyers  are  allowed  to  obtain  100% financing  from  financial  institutions  for  residential  properties  priced  at   MYR100k -400k,  effectively  enabling  them  to  own  a  property  without  the  need  to  pay  a 10% downpayment.

Source: RHB