TITIJAYA LAND BHD

By AmInvestment Bank Research Fair value: 95 sen

Buy (maintained)

AMINVESTMENT Bank, in its latest report on Titijaya, is maintaining its forecasts for the company with a buy call and a fair value of 95 sen.

“Titijaya has proposed to subscribe to a 99% equity interest in BJ Properties Sdn Bhd (BJ) for RM9.9mil cash. BJ owns a 6.8-acre leasehold residential land along Jalan Nipah, off Jalan Ampang, Ampang (behind private hospital Gleneagles KL).

“Titijaya intends to develop a residential project with some commercial elements with a total gross development value (GDV) of RM1.5bil on the land.”

The research house said BJ has about RM100mil in net debt, which means Titijaya is effectively paying about RM370 per sq ft for the land.

“Our research shows that the land has been on the market since 2014 (if not earlier), with an asking price that has been sliding from RM1,400 per sq ft then, to RM1,000 per sq ft at present.”

AmInvestment Bank said Titijaya and China’s CREC are developing a RM1.8bil residential/office project called 3rdNvenue on a 6.1-acre land just right opposite this piece of land.

“The 6.1-acre land was valued at about RM1,500 per sq ft in 2016, pursuant to the joint venture agreement.”

The research house believes Titijaya has struck a good deal for itself in its latest land acquisition.

“However, we are mindful that it is unrealistic to expect launches from the land over the short to medium term given the oversupply situation in the high-rise residential segment in the Klang Valley at present.”

AmInvestment Bank is also concerned about the potential “cannibalisation” on Titijaya’s 3rdNvenue project just across the road, should both projects be carried out concurrently.

“As such, we believe it is premature to factor in any future earnings from the project in our valuations for Titijaya,” it said.