IJM Land - Stronger than expected sales

Period  3Q13 /9M13

Actual vs. Expectations  9M13 net profit of RM150m is broadly within expectations, accounting for 68% of consensus estimates and 65% of ours. 2H (particularly 4Q) is typically stronger in billings.

 9M13 chalked up RM1.4b sales (+59% YoY), which is quite close to ours and the company’s full FY12E target of RM1.5b. 3Q13 chalked up c. RM0.5b sales (0% QoQ, +85% YoY), whose drivers were Johor (Nusa Duta), Light Collection III, Seri Riana and S2 Centrio, Wangsa Maju.

Dividends  None, as expected.

Key Results Highlights  YoY, 9M13 net earnings was up 9% YoY largely due to the gains on disposal (gross: RM20m) of Menara IJM and improvement in EBIT margins by 2.1ppt to 22.7%. Without the gains, core earnings eroded slightly by 6% to RM129m since associate losses widen to RM10m from RM5m in 9M12, interest income fell by 27% and start-up losses arising from development of Royal Mint Street@London.

 QoQ, 3Q13 topline grew 34% to RM358m because of stronger property billings and sales, which were more than sufficient to cover the increased associate losses (+239% QoQ to RM5m). Hence, net profit rose 19% to RM54m.

Outlook  Management appears confident with a higher FY13E sales target of RM1.7b given its new launch of Sanctuary Garden@Bkt Mertajam (estimated GDV of RM100-150m) and the widely anticipated launch of Rimbayu. We understand that Rimbayu Phase 1 (GDV: RM300m) is fully booked and should be converted to SPA sales by end-FY13. Apart from UOA Development (OP; TP: RM2.30), IJMLAND is the only other developer to beat their own and our sales targets.

Change to Forecasts  Raise FY13E sales assumptions by 13% to RM1.7b.

Impact will only be felt from FY14 onwards. Hence we raise FY14E earnings by 4% but maintain FY13E net profit. Unbilled sales of RM1.4b 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 for the last 7 consecutive quarters.

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