• Indicative FV of MYR0.30. KTI Landmark launched its first project in 1998, and has since became a major developer based in Sabah. The group has built a relationship with the Sabah Housing and Urban Development Board (LPPB), which enables it to secure township and affordable housing projects in the state. Our indicative FV is based on a 60% discount to RNAV.

• Established relationship with LPPB, which is the state authority in Sabah for housing and township development, as well as affordable housing. In 2013, when the Malaysia Civil Servants Housing Programme (PPAM) was introduced to provide affordable homes for government servants, KTI shifted its business strategy away from its own property development to providing design and build construction services for LPPB. In these projects, LPPB is the land and project owner, while KTI is involved in all other aspects of property development. These projects have a 50:50 profit-sharing arrangement.

• Diversifying with its own projects. The group launched The Logg (GDV: MYR1.02bn) in Dec 2021 and Ayuria Place (GDV: MYR371.4m) in Sep 2023. Ayuria Place is a mix of commercial and residential properties spanning 20.4 acres, strategically located 8km away from the Kota Kinabalu city centre. The group plans to launch a second phase of apartments with an estimated MYR491.7m GDV in late 2025. Meanwhile, The Logg is a mixed development project on a 5-acre land comprising condominiums, apartments, a 4-star hotel, and a commercial building featuring retail outlets and purpose-built offices. While the project is a joint venture with LPPB, KTI will have full ownership of The Logg upon the full payment of LPPB’s compensation of 40% of the land cost amounting to MYR30.7m.

• Utilisation of proceeds. 38% of the proceeds is allocated for the acquisition of landbank for its Ayuria Place project in Alamesra, Kota Kinabalu, which was purchased for a cash consideration of MYR74m. Another 43% of the proceeds will be for working capital, and 6% for the repayment of bank borrowings.

• Earnings estimates. We estimate that KTI’s net profit will grow by 23%, 17%, and 21% over FY24-26F. Its current unbilled sales of MYR271.6m and new project launches should underpin near-term earnings. Based on our FY25F earnings estimates and MYR0.30 issue price, the stock has a P/E of 12x.

Source: RHB Securities Research - 4 Jun 2024