TITIJAYA LAND BHD

Fair value: 50 sen

AMBANK Research has lowered its fair value for Titijaya to 50 sen from 73 sen previously after cutting its earnings forecasts for the property developer’s financial years ending June 30, 2018 to 2020, by 2.6%, 15.7% and 19.2% respectively.

Nevertheless, the brokerage maintains its “buy” recommendation on Titijaya, which is currently trading at an undemanding valuation of less than seven times earnings for 2018-2020.

Despite a lower fair value, Titijaya offers potential upside of more than 30%.

AmBank Research says it imputes a lower revenue growth for Titijaya due to a higher loan rejection rate and weaker take-up rates amidst the prolonged slowdown in the local property market.

It expects Titijaya to register net earnings of RM80.3mil, RM83.6mil and RM88.5mil for FY18-FY20 respectively.

At present, Titijaya has unbilled sales of RM360mil-RM370mil together with a slew of new launches in FY18-FY19 that will boost its revenue in the near term.

Overall, Titijaya has lined up RM826mil of new launches (high-rise residential) over the immediate term, with the key selling points being: > affordability for units in phase 1 of Damai Suria @ Bukit Subang at RM300,000 to RM450,000; > premium locations for units in Riveria, KL Sentral at RM300,000-RM500,000; and > phase 2 of 3rdNvenue at RM450,000RM1mil.

The group has a total landbank of 208 acres, located mainly in Klang Valley with gross development value of RM12.4bil, provides good earnings visibility and will drive the company’s growth going forward.

Nonetheless, AmBank Research says it remains cautious on the property sector due to: > the generally still elevated home prices; > the low loan-to-value offered by banks; and > house buyers’ inability to qualify for a home mortgage due to their already high debt service ratios

In addition, the still subdued consumer sentiment against a backdrop of rising cost of living and elevated household debts is holding consumers back from committing themselves to the purchase of big-ticket items like a house.

However, it sees a bright spot in the affordable segment.