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.
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
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