Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: KENANGA
IJM Land Bhd (March 18, RM2.30)
Initiating coverage with buy and RM2.79 target price: We like IJM Land given its promising growth prospects (two-year CAGR of 75%; three-year CAGR 32%). It is an alternative proxy to Malaysia's property sector with a geographically diversified strategic landbank with large GDV (gross development value) pipeline.
There is also positive news flow on the stock from headline projects like The Light, Changchun @ China as well as the potential of the company benefiting from foreign investors' re-entry given its low foreign shareholding levels currently.
Its fair value of RM2.79 is based on diluted (ex-warrants only) sum-of-parts (SOP) revised net asset value (RNAV) excluding Canal City. Our RNAV conservatively assumes overall 14% net margins, 12% WACC (weighted average cost of capital) rates and longer project durations of more than five years.
IJM Land is currently trading at FY11 PER of 16 times and 1.5 times PBV (price-to-book value). Our fair value provides 22% upside to current share price (RM2.28 on March 17).
IJM Land owns one of the largest landbank (more than 7,600 acres) with estimated RM25 billion GDV in Malaysia. Sizeable lands are in key property growth regions like the Klang Valley, Penang island, Johor Bahru (JB), Seremban, Sarawak and Sabah.
IJM Land is one of the few developers with expertise in almost all property segments; ideal for capitalising on all property cycles. A promising future lies ahead for IJM Land given two large pipeline projects - The Light and Sebana Cove.
The Light - Phase I (residential component) of RM1.2 billion GDV is enjoying brisk sales. The Light Linear (Linear) and The Light Point has achieved 85% and 70% take-up rate.
The residential portion should yield around 35% gross margins. We do expect future margin and GDV enhancement given ability to price up. The Light's residential component makes up 5% of our revised asset value.
There's also the China development worth RM500 million in GDV. IJM Land and Talam Corp Bhd (50:50 JV) are to develop a high-end condominium cum retail podium development along Xian Road, Changchun, Jilin Province.
Changchun is one of China's largest automotive cities. Site is located along the city's prime main road and has obtained development approvals.
The balance sheet is strong. Current net gearing stood of 0.25 times is healthy versus sector range of 0.2 times to 0.4 times. Ample room to gear up for reclamation of The Light-Phase II, given large cash pile of RM414 million as at Dec 31, 2009 is more than sufficient to cover estimated reclamation cost of RM224 million.
We estimate between RM1 billion to RM1.3 billion sales for FY10-11E, implying a FY10-11E net profit of RM104 million (+103% y-o-y) to RM161 million (+55% y-o-y).
Unbilled sales remain strong at RM800 million (excluding around RM200 million bookings sales) as at Dec 31, 2009 with sales touching the RM1 billion mark. Key earnings drivers are its townships such as Seremban 2, The Light and en bloc sale of AEON Mall @ Melaka. - Kenanga Research, March 18 This article appeared in The Edge Financial Daily, March 19, 2010.
Company Name: IJM LAND BERHAD
Research House: KENANGA
IJM Land Bhd (March 18, RM2.30)
Initiating coverage with buy and RM2.79 target price: We like IJM Land given its promising growth prospects (two-year CAGR of 75%; three-year CAGR 32%). It is an alternative proxy to Malaysia's property sector with a geographically diversified strategic landbank with large GDV (gross development value) pipeline.
There is also positive news flow on the stock from headline projects like The Light, Changchun @ China as well as the potential of the company benefiting from foreign investors' re-entry given its low foreign shareholding levels currently.
Its fair value of RM2.79 is based on diluted (ex-warrants only) sum-of-parts (SOP) revised net asset value (RNAV) excluding Canal City. Our RNAV conservatively assumes overall 14% net margins, 12% WACC (weighted average cost of capital) rates and longer project durations of more than five years.
IJM Land is currently trading at FY11 PER of 16 times and 1.5 times PBV (price-to-book value). Our fair value provides 22% upside to current share price (RM2.28 on March 17).
IJM Land owns one of the largest landbank (more than 7,600 acres) with estimated RM25 billion GDV in Malaysia. Sizeable lands are in key property growth regions like the Klang Valley, Penang island, Johor Bahru (JB), Seremban, Sarawak and Sabah.
IJM Land is one of the few developers with expertise in almost all property segments; ideal for capitalising on all property cycles. A promising future lies ahead for IJM Land given two large pipeline projects - The Light and Sebana Cove.
The Light - Phase I (residential component) of RM1.2 billion GDV is enjoying brisk sales. The Light Linear (Linear) and The Light Point has achieved 85% and 70% take-up rate.
The residential portion should yield around 35% gross margins. We do expect future margin and GDV enhancement given ability to price up. The Light's residential component makes up 5% of our revised asset value.
There's also the China development worth RM500 million in GDV. IJM Land and Talam Corp Bhd (50:50 JV) are to develop a high-end condominium cum retail podium development along Xian Road, Changchun, Jilin Province.
Changchun is one of China's largest automotive cities. Site is located along the city's prime main road and has obtained development approvals.
The balance sheet is strong. Current net gearing stood of 0.25 times is healthy versus sector range of 0.2 times to 0.4 times. Ample room to gear up for reclamation of The Light-Phase II, given large cash pile of RM414 million as at Dec 31, 2009 is more than sufficient to cover estimated reclamation cost of RM224 million.
We estimate between RM1 billion to RM1.3 billion sales for FY10-11E, implying a FY10-11E net profit of RM104 million (+103% y-o-y) to RM161 million (+55% y-o-y).
Unbilled sales remain strong at RM800 million (excluding around RM200 million bookings sales) as at Dec 31, 2009 with sales touching the RM1 billion mark. Key earnings drivers are its townships such as Seremban 2, The Light and en bloc sale of AEON Mall @ Melaka. - Kenanga Research, March 18 This article appeared in The Edge Financial Daily, March 19, 2010.
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