IJM Land - Tapping onto Bangsar South’s success

News   IJMLAND and Amonda Development S/B (Amonda) in JV Agreement (40:60) to develop c. 57.8ac leasehold land in Kerinchi (next to Bangsar South and 3km from KTM/LRT station). Amonda is in a privatisation agreement (PA) with DBKL (proprietor of the land) to undertake the mixed development project. The JV Co will have to pay DBKL project land value and minimum guaranteed profit of; 1) RM331m if paid within 6 months of the CP fulfillment of the PA; 2)RM391m if paid within 3 years of the PA. Also, DBKL is entitled to 20% share of the difference between the actual and minimum profit guarantee. 

Comments   Guided project GDV of RM2.0b. So land cost is fair as it is only 17% of GDV and we estimate gross margins of 20%. We are still seeking further clarity on theproject components as we understand the land is a combination of commercial and residential land. ASP is likely c. RM700-800psf and is believable when compared to Bangsar South (refer overleaf). 

 We understand the JV Co will opt to pay RM331m land value and minimum guaranteed profit. IJMLAND net gearing, post its JV Co commitments and the UK land acquisition, will result in 0.06x net gearing (from 1Q13’s 0.11x net cash position) which still provides ample of room for other land opportunities. 

 Even though we think it is a prized location at decent land costs, we are Neutral on acquisition as share price excitement is unlikely given the budget risk. 

 

Outlook  2Q13 sales likely to be QoQ higher, because 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 and has c.7000 registrations. Projects like Sebana Cove and its maiden UK project will take place from FY14 onwards.  

 

Forecast  No changes to FY13E earnings of RM255m and only minimal (+1%) impact to FY14E earnings of RM262m. Project commencement is likely in mid CY13, meaning significant associate earnings contributions from FY15E onwards over an estimated 3-4 year development period.

 

Rating Maintain OUTPERFORM

 Developer with the most ‘affordable’ product offerings. More landbanking and overseas ventures will excite investors, particularly given IJMLAND’s net cash position at 1Q13.

Valuation   Project only adds 2sen to our FD SoP RNAV to RM3.07. Ahead of our Property Sector update on Budget expectations, we are lowering our TP to RM2.60 (RM2.75 previously) as we widen our FD SoP RNAV discount to 15%* from 10%. 

 

Risks  Unable to meet sales targets. Delays in launches.

Sector risks, including severe negative policies.

Source: Kenanga