Company Result 3 September 2018 Titijaya Land Berhad

Transcription

1 JF APEX SECURITIES BERHAD (47680-X) Company Result 3 September 2018 Titijaya Land Berhad Disappointing 4QFY18 BUY Maintained KLCI points Share Price RM0.345 Target Price RM0.41 Expected share price return 18.8% Expected dividend return 0.7% Expected total return 19.5% Stock Data Bursa / Bloomberg code 5239 / TTJ MK Market / Board Main / Industrial Syariah Compliant status Yes Issued shares (m) Market cap RM497.35m Par value RM week price Range RM Beta (against KLCI) m Average Daily Volume 1.62m 3-m Average Daily Value^ RM0.63m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % TITIJAYA GROUP SDN BHD TITI KAYA SDN BHD 5.15 AIA BHD 4.77 Estimated free float Source: Bloomberg Lee Chung Cheng , ext. 758 cclee@jfapex.com.my This report is also accessible at Result Results miss expectation. Titijaya Land Berhad (Titijaya) recorded a net profit of RM10.6m in its 4QFY18 results, tumbling 37.6% yoy and 51.2% qoq. For the full year of FY18, the Group posted RM72.9m in net earnings, which slid 4.8% yoy. The result is below our expectation, accounting for 85% of our full year net earnings estimate. Comment Depressing 4Q. Titijaya registered weaker yoy results in its 4QFY18 mainly due to slump in revenue (-40.6% yoy) as the project H2O nears completion which resulted in significantly lower progress billings. Furthermore, the higher effective tax rate of 55% during the quarter also weighed on its bottom line (vs 4QFY17: 39%) as losses of certain subsidiaries of the Group where deferred tax assets were not recognised. Similarly, the lower FY18 results were attributable to lower PBT margin (-2.2ppts yoy) pursuant to higher administrative expenses incurred during the year on untenanted investment property, corporate exercise, professional fees and banking facilities. Weaker qoq. The Group also posted a lacklustre performance on a qoq basis no thanks to lower top line (-9.4% qoq) coupled with higher operating expenses (EBIT margin: -3.3ppts qoq) in relation to marketing costs incurred for construction of show units and sales gallery for upcoming projects launches namely 3 rd Nvenue in Jln Ampang, The Shore at Kota Kinabalu, Riveria City at KL Sentral and Damai Suria in Subang. Furthermore, the higher tax expense during this quarter, as mentioned earlier, also dragged down earnings. Fall short of FY18 sales target. Titijaya achieved new sales of RM343m which came below of its new sales target of RM500m in FY18 and slightly below its FY17 sales of RM355m. Meanwhile, the Group chalked up RM320m unbilled sales as of 4QFY18, which underpin its top line visibility of close to a year (0.8x FY17 revenue). New launches in the pipeline for FY19. The Group targets to launch a few projects totalling RM826m GDV in FY19 (2HCY18) which include: a) Damai Suria Phase 1 serviced apartment (previously known as Damansara West) with an estimated GDV of RM168m, b) 3 rd Nvenue@KL Phase 2 serviced apartment with an estimated GDV of RM338m, and c) Riveria City@KL Sentral Phase 1 serviced suite with an estimated GDV of Please read carefully the important disclosures at end of this publication

2 RM320m. Proposed final single-tier dividend. Titijaya has declared a final dividend of 0.25sen/share for FY18 (vs FY17: 0.5sen/share) to reward its shareholders. Earnings Outlook/Revision We slash our FY19F net profit forecast by 14.4% to RM78.1m (+7.1% yoy) after lowering sales assumption to RM400m as well as reducing its margins in view of high start-up costs for new projects and promotional expenses. Also, we introduce our FY20F net profit forecast of RM84.5m (+8.2% yoy) based on sales assumption of RM500m. Valuation/Recommendation Maintain BUY on Titijaya with a lower target price of RM0.41 (RM0.64 previously) as we change our valuation methodology from RNAV to PE to better reflect prevailing weak market sentiment towards property counters in which investors concern on earnings visibility rather than asset value. Our revised target price is now pegged at 7.5x FY19F FD PE, which is at the mid-range of current valuations of other small-and-mid cap property counters (trading at PE multiple of 5-9x). We advise investors to accumulate the stock on current share price weakness. We continue to favour the Group in the long run as we believe the Group is able to fast track its projects execution to ride on the gradual recovery of property outlook. This is backed by its unique business model and landbanking strategy of scouting for joint venture and land-swap opportunities with reputable government agencies and other synergistic partners, as well as its aggressive and innovative marketing efforts in targeting mass market housing segment. Risks include: 1) high loan rejection rate; 2) affordability issue; 3) prolonged slowdown in property market; 4) subdued consumer sentiment towards bigticket items due to high cost of living. 2

3 Figure 1: Quarterly Figures Year to 30 June (RMm) 4QFY8 3QFY18 4QFY17 qoq (%) yoy (%) FY18 FY17 yoy (%) Revenue Gross profit Operating profit Pre-tax profit Net profit Core net profit Gross margin (%) / ppt EBIT margin (%) / ppt PBT margin (%) / ppt Figure 2: P&L and Financial Summary Year to 30 June (RMm) FY2015 FY2016 FY2017 FY2018 FY2019F FY2020F Revenue Gross profit Operating profit Profit before tax Net profit Core net profit EPS (sen) DPS (sen) P/E (x) P/BV (x) Diluted EPS (sen) FD P/E Revenue growth (%) Net profit growth (%) Core net profit growth (%) Gross margin (%) Operating margin (%) PBT margin (%) Dividend yield (%) Net gearing (%) ROE (%) ROA (%)

4 Figure 3: Balance Sheet (RM'm) FY2015 FY2016 FY2017 FY2018 FY2019F FY2020F Balance Sheet Cash Current assets Non-current assets Total assets Short term debt Current liabilities Long term debt Non-current liabilities Total liabilities Shareholders' equity MI Total equity Total liabilities & equity Figure 4: Cash Flow (RM'm) FY2015 FY2016 FY2017 FY2018 FY2019F FY2020F Cash Flow Cash flow from operations Cash flow from investing Cash flow from financing Cash generated Cash at beginning Cash at end of period

5 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD 6 th Floor, Menara Apex Off Jalan Semenyih Bukit Mewah Kajang Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) PJ Office: 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) DEALING TEAM Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Institutional Dealing Team: Zairul Azman (ext 746) Fathul Rahman Buyong (ext 741) Ahmad Mansor (ext 744) PJ Office: Mervyn Wong (ext 363) Azfar Bin Abdul Aziz (Ext 822) Tan Heng Cheong (Ext 111) RESEARCH TEAM Lee Chung Cheng (ext 758) Lee Cherng Wee (ext 759) Low Zy Jing (ext 754) Nursuhaiza Hashim (ext 752) Siau Li Shen (ext 753) JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock s total returns* are expected to be within +10% to 10% within the next 12 months. SELL : The stock s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. JF Apex Securities Berhad is a participant of the Mid and Small Cap Research Scheme ( MidS ), and will receive compensation for the participation. This report has been prepared by JF Apex Securities Berhad pursuant to the MidS administered by Bursa Malaysia Berhad. This report has been produced independent of any influence from Bursa Malaysia Berhad or the subject company. Bursa Malaysia Berhad and its group of companies disclaims any and all liability, however arising, out of or in relation to the administration of MidS and/or this report This report is also accessible at Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 5