Looking beyond FY2015

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: JF APEX

Price Call: HOLD

Target Price: 3.55

Launching Royal Mint Gardens project in London

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: BUY

Target Price: 3.32

IJML - Raising equity interest in Bandar Rimbayu project

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: BUY

Target Price: 3.76

Strong sales momentum

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: BUY

Target Price: 2.60

Expect a stronger second half

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: BUY

Target Price: 2.60

IJML - Developing Kerinchi Land

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: BUY

Target Price: 2.60

IJML - Maiden venture to the U.K

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: MIDF

Price Call: HOLD

Target Price: 2.60

Property & M-REIT - NEUTRAL - 28 March 2012

Stock Name: UEMLAND
Company Name: UEM LAND HOLDINGS BHD

Research House: KENANGA

Price Call: BUY

Target Price: 2.65

Stock Name: UOADEV
Company Name: UOA DEVELOPMENT BERHAD

Research House: KENANGA

Price Call: BUY

Target Price: 1.65

Stock Name: SPSETIA
Company Name: SP SETIA BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 3.90

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD

Research House: KENANGA

Price Call: HOLD

Target Price: 2.28

Stock Name: MAHSING
Company Name: MAH SING GROUP BHD

Research House: KENANGA

Price Call: HOLD

Target Price: 2.18

Stock Name: E&O
Company Name: EASTERN & ORIENTAL BHD

Research House: KENANGA

Price Call: SELL

Target Price: 1.49

Stock Name: HUNZPTY
Company Name: HUNZA PROPERTIES BHD

Research House: KENANGA

Price Call: SELL

Target Price: 1.44

We are upgrading the PROPERTY Sector to NEUTRAL fromUNDERWEIGHT. The sector will be unexciting because of weaker fundamentals onthe back of a tighter banking liquidity. We also believe that the Malaysianproperty sector has hit peak demand after two consecutive years of >20% YoYgrowth in sales. But downside risk will be cap by 1) developers' strongearnings visibility; 2) changes of sales mix towards the affordable segmentplus Johor products will buck the general flattish trend and allow for decent salestargets; 3) the market has probably priced in the negatives in the sector; 4)Bank Negara unlikely to introduce further tightening measures. We reiterateOUTPERFORM on UEMLAND (TP: RM2.65) and UOAD (TP: RM1.65) while MARKET PERFORMratings are maintained on SPSETIA (TP: RM3.90), IJMLAND (TP: RM2.28), MAHSING(TP: RM2.18).

We retainedUNDERPERFORM ratings on E&O (Top UNDERPERFORM; TP: RM1.49) and HUNZA(TP: RM1.44). M-REIT and property investment remains as OVERWEIGHT as 'flight tosafety' options given our 2Q12 house view of 'top slicing', with CMMT (OP; TP:RM1.55) and KLCC Property (MP; TP: RM3.45). Listing of IGB REIT will keepvaluations high. The market's anticipation of KLCC potentially REIT-ing some ofits assets will also add excitement to the sector, although we believe it willnot likely be in the near term (refer to our 21/3/12 report, 'REIT-ing?'). Our2Q12 Top OUTPERFORM is Axis REIT (TP: RM2.82) for 1) its strong acquisitionpipeline, which allows for faster NAV growth and hence quicker realisation ofits valuations;  2) limited officeoccupancy risks given its quality tenants; 3) there being less choices of goodoffice/industrial REITs compared to retail ones and 4) its net dividend yieldof 6.0% is higher than CMMT's 5.5%.  4Q11results were mainly within expectations, save for UEMLAND which exceeded our estimate. Developers enjoyed strongearnings growth of >40% for 2011 given their last two years' strong sales.Hunza Properties was the exception with a sharp earnings decline of 30% as ithad held back launches. Generally, the developers were able to meet their 2011sales targets, implying a 10%-50% YoY growth in sales. Meanwhile, propertyinvestment and M-REITs results under our coverage came in withinexpectations. 

Weak fundamentalswill keep the sector unexciting. The tighter mortgage assessment criteria wasobvious over the last few months based on developers' feedback and a sharp MoMdrop in Jan-12 mortgage loans approvals. Whilst residential demand interest isstill strong, loan approval periods have more than doubled. We also understandthat bank valuations of properties, even for new launches, have been toneddown, affecting buyers' effective margin of financing. Many are not getting thefull 90% margin of finance even for their 1st or 2nd  homes, given the current residential marginof finance of 80%-85% for new launches. Interestingly enough, developers underour coverage have lowered their 2012 sales growth targets from their previousquarter's guidance of 20%-60% to 5%-50% now. Those with more bullish targetshave 1) strong exposure to Johor (a market which we are very bullish on) withready launches like UEMLAND and SPSETIA; 2) overseas projects like Australia, whichare still enjoying favorable property dynamics like SPSETIA and 3) very highlyspecialised projects like UOAD, which are looking at potential en bloc sales oftheir MSC status buildings. Although it is too early to say we have seen theworse of the tighter banking liquidity given the limited data of just theJan-12 month (policy was effective 1-Jan-12), we note that Jan-12 residentialloans approval decline of 24% MOM was the sharpest is the last 12 months. Webelieve the situation will continue to persist until Bank Negara relaxes itsresponsible lending guidelines, although on the positive side, Bank Negara isunlikely to impose further tightening measures. Landbanking news flow is thin, which reinforces our view of a lacklustreyear. 

But strong earningsvisibility will limit further downside risks. We do observe more mass housingand Johor landbanking, as well as launches in the affordable housing segment.We expect this trend to continue throughout the year as developers lean theirearnings mix towards these products to realise sales targets. For now, theirsales targets look achievable as developers will be rolling out variations offinancing packages, while rebates are also here to stay. However, high volume mass housing sales also meansless attractive margins. We will be monitoring the mass market closely as tighterbanking liquidity seem to be hurting first home owners.  Ironically, nearly 50% of applicants for theMy First Home Scheme (100% financing for homes RM400,000/unit or less for firsthome buyers earning <RM3000/month). That said, we think the market haspriced in the bulk of the negative policy news and expect the sector to rangebound at its Fwd PBV mean (KLPRP CY12 PBV of 0.8x @ 6-year average). Also, mostof our developers (except for Hunza) have high unbilled sales providing strong earningsvisibility of 1-1.5 years. Developers with good dividends, like UOA (4.6% netyield) and MAHSING (4.7% net yield), should limit their share price weakness,provided they are still able to meet their sales targets.   

Source: Kenanga

IJMLAND - IJM Land - right on target

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: AMMB

IJM Land Bhd
(May 30, RM2.80)
Maintain buy at RM2.80 with fair value of RM4: We reaffirm our 'buy' rating on IJM Land with our fair value unchanged at RM4, based on an unchanged 10% discount to our fully-diluted net asset value (NAV) estimate of RM4.46.

IJM Land's 4QFY11 net profit came in at RM44 million, bringing its full-year earnings to a record RM218 million (two times FY10), meeting our bullish estimate but way ahead of consensus' by 25%. This underscores our strong belief in management's delivery capabilities. The company announced a dividend of four sen per share (FY10: two sen per share).

Although earnings were against the preceding quarter, this was due to the lumpy recognition of the earlier sale of the Aeon Mall in Melaka.

Our earnings estimates for FY12F and FY13F remain largely unchanged at RM285 million and RM314 million. Earnings will be underpinned by strong unbilled sales of about RM1 billion and a new sales assumption of RM1.5 billion over RM1.5 billion to RM2 billion of planned launches for FY12F. We introduce our FY13F earnings at RM340 million, representing 8% year-on-year growth.

The group plans to launch RM1.5 billion to RM2 billion worth of properties ' including Light Collections 3, The Address. New sales remain solid, amounting to RM450 million in the first three months of CY11. We believe the group would be able to register stronger sales against last year's robust RM1.5 billion.

IJM Land is moving to capitalise on the maturity of its Seremban II township by divesting 15 to 20 acres of commercial land to Mydin hypermarket. This should accelerate the development potential of the remaining 300 acres of commercial land.

Infrastructure and earthworks for its 50%-owned Canal City (1,877 acres) are slated to start soon. Acquired for about RM50 psf, Canal City is scheduled for launch in 2012 to take advantage of the lack of affordable landed homes priced below RM350,000 in the suburbs.

IJM Land's valuations are very attractive ' trading on forward multiples of 11 to 13 times over FY12F to FY14F, and a 37% discount to fully-diluted NAV. Despite its deep value, IJM Land's share price needs to get a kick from a meaningful land deal to reinvigorate excitement over the stock. This may soon take place. ' AmResearch, May 30


This article appeared in The Edge Financial Daily, May 31, 2011.

IJMLAND - Pricing trends, land deals drive NAV growth

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: AMMB

Property sector
Maintain overweight: We reaffirm our 'overweight' stance on the property sector, with S P Setia and IJM Land as our deep conviction 'buys'. We are raising our net asset value (NAV) estimates to reflect an expected reacceleration of residential pricing growth of 10% this year against our previous forecast of +5%, given the rebound in transaction volume and higher replacement costs. We expect NAV upgrades to lead the next wave of rerating for property equities.

We have lifted our fair value for S P Setia from RM7.38 to RM8.10 ' at parity with our revised fully-diluted (FD) NAV of RM8.10 per share. For IJM Land, we raise our fair value from RM3.88 to RM4 ' based on an unchanged 10% discount to our FD NAV of RM4.45. On a relative basis, we continue to expect news flow momentum centring on presales and acquisitions to be more significant for S P Setia than IJM Land.

Replacement costs are on the rise due to escalating land cost as well as rising prices of building materials from timber, aluminium and cement to steel. The recent aggressive bids for land surrounding mature neighbourhoods would solidify the strong pricing trends as land traditionally accounts for between 25% and 30% of residential prices.

In addition, cement makers including Lafarge have just lifted average selling prices by some 6% in March 2011. Steel companies including Ann Joo and Lion Group are also guiding for higher selling prices this year.

The expected reacceleration in residential prices would also be preceded by a sustained expansion in transaction volume, which is already underway now. Our discussions with developers revealed that demand has rebounded strongly in the past month, as evident in the strong response to recent launches.

Buyers appear to have adjusted to the 70% loan-to-value restriction on third property, paving the way for a meaningful inventory liquidation cycle to kick in.

Against this backdrop, we expect developers to aggressively step up presales ' the primary valuation driver of property equities. There are several presales in the coming months in select prime neighbourhoods that may establish new pricing benchmarks, with an associated uplift to the broader residential pricing trends. Desa ParkCity is set to launch 127 units of 'terrace' houses, The Mansions, priced from an unprecedented RM650psf (+8%) on built-up area. At KL Eco City, S P Setia will be launching some 750 condominium units priced from RM900psf.

Registration of interest has been very strong for both projects despite the premium pricing. This implies that the imminent successful launches of The Mansions and KL Eco City would establish new market clearing prices, leading to a repricing of future presales as well as secondary units in the suburbs. This was the case when the Casaman was launched in Desa ParkCity at the then unprecedented price of RM600psf in 2010.

There may also be potential liberalisation of residential plot ratios, particularly in established urban areas where there is an acute shortage of land available for development, coupled with strong effective demand.

As it is, we are already seeing generous plot ratios at select sites to defray the high land cost. Such a move, if it materialises, would accentuate NAV expansion from higher gross development value. We have yet to factor this into our NAV models.

Tactically, we also expect news flow centring on the redevelopment of some 3,300 acres of prime land in Sungai Buloh to sustain buying interest in property equities. The said land has high immediate development potential. The accretion to NAVs should be significant for developers. Kwasa Land, the property arm of the Employees Provident Fund, is the master developer which will establish joint ventures with select developers for several parcels.

On township track record, S P Setia would be the leading candidate with its Eco Park brand. It also boasts a comprehensive management team. Sam Ling's Desa ParkCity and Gamuda Land are other good partners, given their strong niche in developing premium residential projects that serve as industry benchmarks.

IJM Land and Sime Darby Property may also play a role, while malaysian Resources Corp Bhd may be eyeing the commercial precinct. We believe that the tender for the JV parcels may take place after the award of the MRT construction packages this year. ' AmResearch, April 18


This article appeared in The Edge Financial Daily, April 19, 2011.

IJMLAND - Has IJM Land been forgotten?

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: RHB

IJM Land Holdings Bhd
(April 14, RM2.79)
Maintain outperform at RM2.80 with revised fair value of RM3.28 (from RM3.18): Following the unsuccessful merger between IJM Land and Malaysian Resources Corp Bhd (MRCB), IJM Land's share price has fallen from the peak of RM3.24 at end-December. Despite the continued gradual run-up in share prices in the property sector (the KL Property Index has risen 8% year-to-date) since January 2011, the performance of IJM Land's shares has been flattish (YTD -2%) against Mah Sing Group Bhd's +41% and S P Setia Bhd's +11%. Hence, the stock is largely a laggard among the key property stocks.

We believe the current valuations on IJM Land are very decent, given the company's unchanged, solid fundamentals, strategic landbank exposure and more importantly the expected over 50% net earnings growth in FY12, which is one of the highest among the property stocks under our coverage. Our forecast on IJM Land's FY12 earnings is only 3.3% higher than the consensus estimate. In comparison with UEM Land Holdings Bhd and S P Setia's price-to-book value of 3.3 times and three times, IJM Land is currently trading at only two times PB, similar to Mah Sing's 2.2 times.

The value of the 2,000-acre (809.4ha) Canal City land will be unlocked next year. We believe management's guided gross development value (GDV) is rather conservative at RM6 billion, which should give an upside on realisable net asset value (RNAV). We estimate the potential GDV from this land could be as high as RM10 billion, taking into account a reasonable efficiency ratio and average house price of RM500,000 per unit. We have therefore imputed a GDV estimate of RM8 billion for this project into our RNAV estimate. The project will be a township development, which should enhance IJM Land's long-term recurring earnings from sustainable bread-and-butter projects. As such, we would not be overly concerned over any delays or unexpected turns in the property cycle. Given IJM Land's established track record, we believe the project will be another successful big township project in the Klang Valley (apart from S P Setia's Setia Alam). First launch of the project is targeted in 2H12. This is slightly later than expected due to revisions in the development plan and concept and timing for submissions and approvals.

The risks include: (i) competition from peers; (ii) regulatory risk; (iii) rising building material costs; and (iv) country risk.

In our recent discussion with management, it was indicated that the parent company IJM Corp will be converting its RCULS soon. The net impact on our FY12/13 earnings per share forecasts is -15% to -17.5%, after accounting for the interest savings and larger share base.

We reiterate our 'outperform' call with a higher fair value of RM3.28 (from RM3.18), at its RNAV per share, accounting for the higher GDV estimate for the Canal City land as well as a larger share base. IJM Land is our top pick besides Mah Sing.'' ' RHB Research, April 14


This article appeared in The Edge Financial Daily, April 15, 2011.

IJMLAND - RHB Research maintains Overweight on Johor property sector

Stock Name: IJMLAND
Company Name: IJM LAND BERHAD
Research House: RHB

KUALA LUMPUR: RHB Research believes property stocks which have high exposure to the Johor region, and high beta (>1.8) such as UEM Land, Tebrau Teguh and Mulpha International, are likely to attract trading interests.

'Maintain Overweight on the sector,' it said on Thursday, Jan 13. Its top picks are SP Setia (OP, FV = RM6.95), and IJM Land (OP, FV = RM3.50) for big caps; and KSL (OP, FV = RM2.78) and Mah Sing (OP, FV = RM2.50) for small-mid caps. For Johor exposure, KSL is its fundamental pick.

RHB Research said the market has been attaching increasingly generous valuations to UEM Land (ULHB) and Dialog.

At the current share price of ULHB of RM3.22, the market is valuing the company's landbank in Johor at an average price of RM26-29 psf. We believe the re-pricing of the land and property values in Johor is likely to spill over to other property companies which have substantial landbank in the Johor region.

Indeed, some property companies such as Suncity and SP Setia are getting keener to have (more) development in Johor by buying more landbank there, sharing the growth story of the Iskandar Development Region.