IJM Land - 1H13 see strong sales growth

Period    2Q13 / 1H13

Actual vs. Expectations    1H13 net profit of RM96m is considered within expectations (42% of street and 41% of ours) as 2Hs tend to be stronger in terms of billings. 

Dividends   None, as expected.

Key Results Highlights    QoQ, 2Q13 reported earnings of RM45m decreased by 12% although there were more billings with revenue increasing by 7%. Strippingout the previous quarter’s RM21m one-off gains on disposal of Menara IJM, 2Q13 earnings rose by 29%. 

 YoY, 1H13 net profit grew by 16% due to the reasons mentioned above. Without the gains on disposal, 1H13 core earnings of RM80m slid marginally by 3% due to timing of recognition; note that 2Qs tend to be weak (seen over the last two years) due to the festivities period. 

 1H13 sales of RM0.9b (+47% YoY) is within our and management’s FY13E sales target of RM1.5b. 2Q13 sales of RM550m rose 57% QoQ due to new launches like Wangsa Maju condos, Seri Riana and S2 Centrio while its Johor projects continue to shine as one of the top contributors (36% of sales), which reiterates our bullish stance on Johor. 

Outlook   In 3Q12, the group will be officially launching The Light Collection III (GDV RM360m) is slated for launch. Rimbayu Phase 1 (GDV RM300m; 526 units @ minimum of RM580,000/unit) is expected to be launched soon as the show gallery is almost ready. We expect full take-ups form Rimbayu given its overwhelming interest. 

Change to Forecasts    Maintain FY12-13E earnings based on sales of RM1.5b-RM1.6b. Unbilled sales of RM1.6b provides >1 year visibility. 

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    Maintain TP to RM2.60 based on 15%* discount to FD SoP RNAV of RM3.07.

Risks   Unable to meet sales targets. Delays in launches.

Sector risks, including severe negative policies.  

Source: Kenanga