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Monday, February 22, 2016

AmInvestment retains Buy for Titijaya

KUALA LUMPUR: AmInvestment retains its Buy call on Titijaya Land with an unchanged fair value of RM2.72 a share, which is a 40% discount to net asset value.

The research house said on Monday for its 2QFY16 results, Titijaya posted a net profit of RM18mil on a turnover of RM190mil. This brought its 1H profits to RM38mil (down 7% on-year), and this is within range or 51% of its full-year forecast).

Titijaya’s 1H turnover jumped 23% on-year on a higher pick-up in progress billings for the “3 Elements”, “Zone Innovation” and “Embun @ Kemensah” projects.

However, its bottomline fell 7% on-year on a higher mix of lower margin projects (e.g. 3 Elements). Earnings before interest and tax (EBIT) margins fell to 27% versus 37% a year ago although this was within its full-year forecast of 26%.

“We retain our FY16F net profit forecast of RM75mil. Earnings visibility is well supported by its unbilled sales of RM652mil or approximately 1.9 times its FY15 property revenue of RM341mil. Also, balance sheet remains healthy with a net gearing of 8% as at Dec 31, 2015,” it said.

AmInvestment said the new property sales for 2QFY16 were marginally lower on-quarter at RM75mil against RM80mil in 1QFY16 (1HFY16: RM155mil).

The top contributors to sales during this period were “3 Elements”, “Subang Parkhomes”, “Zone Innovation” and “H20”. Its full-year target is RM400mil.

“In line with a tougher property market, Titijaya is reshaping its FY16F launches to be more market-based; focusing on affordable homes. The new launches are “H20 Block B”, Seri Residences and a landed project in Cheras.

Titijaya is also looking to unveil affordable units priced below RM500,000 to take advantage of the recent relaxation of restrictions for smaller units (that is those below 800sf) within the KL city centre. The development order (DO) for Riveria@KL Sentral (70:30 JV with Bina Puri) should be out by March.

The JV agreement for the Jln Eaton land – its first foray into KLCC – could be done by mid-2016.

“Likewise, Titijaya is looking to rope in investors to accelerate the development of its integrated Emporia @ Monfort development in Shah Alam. The residential units will only be launched after the retail elements take shape.

“Over in Penang, the development order for the Batu Maung project will be resubmitted to incorporate reclamation works in front of the project site. These catalytic projects are central to boost Titijaya’s rising stock and unlock its latent value,” said AmInvestment.

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