IJM LAND - 1Q13 broadly within expectation

Period    1Q13

Actual vs. Expectations

 The 1Q13 core net profit of RM35.0m is considered as broadly within expectations. Although it only made up 15% of the street’s and our estimates, 1Qs are typically the weakest. Furthermore, we expect the realisation of land sale gains of RM13m** to cause a spike in 2Q13/3Q13. 

Dividends   None as expected.

Key Results Highlights

 YoY, the 1Q13 net profit of RM51.1m rose 25% although revenue was flat. The sale of Menara IJM Land (investment property) resulted in a one-off gain on disposal of RM21.1m. Stripping this off, the 1Q13 core earnings was 14% YoY lower due to a lower property pretax margin (-0.9ppt to 20.5%) and higher finance cost.  

 QoQ, 1Q13 revenue dipped by 31% with pretax profit dipping 22%. The previous quarter saw more completion of sales of higher margin products (commercial/bungalows) versus 1Q13 where billings are from newly launched projects (e.g. Vertiq@MetroEast, The Address@Bkt Jambul), resulting in a 4.7ppt compression in the property pretax margin to 20.5%. 

 1Q13 sales of RM350m (+11% YoY) is on schedule to meet ours and the management’s FY13E sales target of RM1.5b. Key drivers are from ongoing projects, with Johor in the lead. 

Outlook   We gather 2Q13 sales could be QoQ higher. In addition to its ongoing projects, two new projects have started sales; Seri Riana and S2 Centrio, which have seen 70%-90% take-ups. Rimbayu (GDV: RM11b) will likely be launched in 2H13. Projects like Sebana Cove and its maiden UK project will take place from FY14 onwards.  

Change to Forecasts  

No changes to FY13-14E core earnings as we are confident of the company’s ability to meet our sales targets, with more aggressive billings in the coming quarters. The unbilled sales of RM1.2b provide a 1 year visibility. 

Rating  Maintain OUTPERFORM

 More affordable products are coming on line, with the company being seen as one of the most ‘sustainable’ developers. Key project catalysts (e.g. Rimbayu, Sebana Cove and UK project) and more overseas ventures will excite investors, particularly given IJMLAND’s net cash position.

Valuation    TP maintained at RM2.75 based on a 10%* discount to our FD SoP RNAV of RM3.05.

Risks   Unable to meet sales targets. Delays in launches.

Sector risks, including negative policies.

Source: Kenanga