IJM Land - Came short but stronger margins BUY

- We maintain our BUY rating on IJM Land with our fair value maintained at RM3.80/share, assigning a discount of 10% to its estimated FD NAV of RM4.20/share.

- IJM Land reported a net profit of RM96.1mil for 1HFY13 after reporting RM45mil in 2QFY13. This came up short of our bullish estimates and consensus, covering 40% and 42% of FY13F forecasts, respectively. The reason for the underperformance was the slower-than-expected progress billings although construction works were somewhat affected by the festive season in August.

- 1HFY13 earnings grew by 16%; although stripping off the gain from the sale of Menara IJM Land, core earnings actually slid by 9% to RM75mil on the back of weaker booked sales (-5% YoY) during the period. 

- On the flipside, core earnings grew by about 50% QoQ despite recording a meagre 5% growth in revenue due to improvement in margins (23%vis-a-vis 19%) on existing developments.

- We gather Bandar Rimbayu’s registrants now have reached 12,000 for its maiden launch of 526 units. Supposed to be launched in September, the launch will go ahead by the end of the year. The delay is not a major issue – we understand IJM Land is front-loading most of the infrastructure works before launching the development. 

- From our recent site visit, we gather the secondary market for Light Linear has been really encouraging. The most recent transacted price was RM960k – providing about 75% upside since the launch there years ago. Meanwhile, Light Collection 3 has been re-launched recently after some tweaking to its development plans.  

- We cut our FY13F earnings by 9% to RM215mil due to slower-than-expected construction works. Nonetheless, earnings visibility for the near- to mid-term is more apparent now whereby unbilled sales have reached RM1.6bil (1.4x FY11 property revenue) as at end- September. 

- Sales continue to be strong; IJM Land has raked in new sales of RM900mil (versus circa RM750mil in 1HFY12) and is confident of achieving between RM1.6bil-RM1.7bil for the full fiscal year. 

- From a valuation standpoint, IJM Land is currently trading at a steep 50% discount to its estimated FD NAV. While sales are still strong and there are exciting projects in the pipeline, we expect the stock to trade within range given the weak sentiment for property counters currently.

Source: AmeSecurities