Wednesday, January 15, 2014

IJM Land -Attractive valuations but a tough year ahead (CS)

IJM Land Berhad
Price (13 Jan 14 , RM) 2.65
TP (prev. TP RM) 3.60 (3.80)
Maintain OUTPERFORM
Attractive valuations but a tough year ahead

● The tightening measures announced during the Budget come into effect in 2014 and will hurt the operating environment for the property developers. Both developers and buyers have been adopting a wait-and-see approach which will lower property transactions in 1H14, in our view.


● Management has guided for Pantai Sentral Park phase 1 to be launched in March 2014 and we believe the sales numbers will materialise only in FY15.

● IJML is looking to jointly develop 50 acres of land at the Light commercial which could result in land sales to the JV company. This could translate into RM871 mn worth sales for the entire 50 acres. We have not built any land sales into our numbers.

● Maintain OP; we have cut our FY14-16E earnings by 6-7% to factor in the softer property market and lower margins going forward. Our new TP is RM3.60 (RM3.80 previously). IJML is trading at attractive CY14E P/E of 12.5x (vs. the historical average of 15.7x) and a discount to RNAV of 40% (vs. the historical average of 30%).

Tougher environment in 2014
The tightening measures announced during the Budget come into effect in 2014 and will hurt the operating environment for the property developers. Both developers and buyers have been adopting a wait-and-see approach which will lower property transactions in 1H14, in our view. Our channel checks suggest that secondary transactions have already started to ‘dry up’ since the budget.

IJML's management believes demand, especially for high-end properties (priced above RM1 mn), will stagnate in the near term but the implementation of GST in 2015 could “spur short term buying”.

Pantai Sentral Park to materialise in FY15
Management has guided for Pantai Sentral Park phase 1 to be launched in March 2014 and we believe the sales numbers would materialise only in FY15 (March year-end).

 IJML will not be immune to the softer market but key projects such as Bandar Rimbayu and Pantai Sentral Park are still seeing strong interest and we expect the take-up rates for those projects to remain strong.

 Potential land sales at Light Commercial
Management is looking to form a special purpose vehicle (SPV) to jointly develop a hotel, a convention centre and a retail mall at the Light phase 2. The exercise could happen in FY15 and IJM Land could recognise land sales of about 50 acres, out of 103 acres.

IJML's land cost for the Light phase 2 is approximately RM130/sq ft while the current market price for the land is closer to RM400/sq ft. If sold to the JV at RM400/sq ft, this translates into RM871 mn worth of land sales for the entire 50 acres. We have not built any land sales into our forecasts.

 Maintain OUTPERFORM, attractive valuations
We have cut our FY14-16E earnings by 6-7% as we push back sales from Pantai Sentral Park phase 1 to FY15, factor in the softer property market and lower development margins going forward. Our new target price is RM3.60 (RM3.80 previously).

Maintain OUTPERFOM; IJML is trading at attractive CY14E P/E of 12.5x (vs. the historical average of 15.7x) and a discount to RNAV of 40% (vs. the historical average of 30%).



Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 15/01/14

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