Titijaya expects net profit, revenue to stay flat in FY17

KUALA LUMPUR (Nov 24): Property developer Titijaya Land Bhd expects its net profit and revenue in the current financial year ending June 30, 2017 (FY17) to be around the same level as in the previous year, its deputy managing director Lim Poh Yit said.

“It is a challenging market. For FY17, we expect results to be consistent with [the] last financial year. So, [the growth] would be quite flat in FY17. But we expect the numbers to pick up in FY18 because of new projects,” he told reporters after the group’s annual general meeting yesterday.

Poh Yit said Titijaya will also reduce the development of industrial and commercial projects, and instead focus more on residential properties. This will see the revenue contribution of the residential segment increasing to 70% by FY18 from 50% currently. The remaining 30% will come from industrial and commercial projects, from the current 50%.

Like many other developers, Poh Yit said, Titijaya is also shifting its focus to the affordable housing market in order to enhance its future earnings.

Titijaya’s recent acquisition of NPO Builders Sdn Bhd, which owns two tracts of land measuring a total of 18.7ha in Bukit Raja, Selangor, will see it develop affordable housing units priced between RM300,000 and RM450,000 as well as commercial units and serviced apartments there. The proposed project will have a gross development value (GDV) of RM2.4 billion.

The group saw its net profit dip 18.4% to RM68.34 million in FY16, from RM80.94 million in FY15, mainly due to an impairment loss on trade receivables and investment property of RM4.6 million and a provision for liquidated ascertained damages of RM2.7 million. Revenue, however, rose 17% to RM400.08 million in FY16, mainly contributed by progress recognition of its H2O Residences@Ara Damansara and 3Elements@Seri Kembangan projects in Selangor.

On whether Titijaya will tie up with Hong Kong-listed China Railway Group Ltd (CREC) to bid for infrastructure projects, Poh Yit said nothing had been firmed up yet.

“We are focused on our core business — property development [for now]. Our tie-up with CREC Development (M) Sdn Bhd (which is a wholly-owned subsidiary of CREC) for the development of a [tract of]leasehold land in Embassy Row, Jalan Ampang, with a GDV of RM2.1 billion, will see revenue generation kicking [in] in FY18,” he said.

The construction of the proposed project is expected to start in the first half of 2017.

On future projects with CREC, Poh Yit said: “If any, we will announce in due course. CREC is strong in the construction sector. We have known CREC all along and have been exploring for a while. But we have not finalised anything for future collaboration.”

According to Titijaya group managing director Tan Sri Lim Soon Peng, almost 90% of its ongoing property projects are priced in the range of RM100,000 to RM599,000 and thus, they are not affected by the recent rise in stamp duty on purchases of properties priced above RM1 million.

“The move to grow this (affordable housing) market, which is the biggest untapped segment in the country, is in line with our business transformation. It is also in line with the government’s initiative to assist the low- and middle-income groups to own homes amid rising living cost,” he said.

Soon Peng also said in a statement issued at a news conference that the group had sufficient land bank sourced at relatively low cost, making its land cost to GDV “attractive”.

“We have sufficient land bank sourced at relatively low cost that is equipped with [a] long-term development horizon in each locality. We foresee demand for houses in the mid or affordable range and mass-market segments within strategic locations,” Soon Peng said.

Titijaya has unbilled sales of RM512 million and is confident of hitting its RM300 million sales target for FY17, he added. It has a total land bank of 95.1ha with a potential GDV of RM10 billion that could sustain the group for the next 10 years.

Titijaya will launch three projects worth a combined GDV of RM646.7 million in the third quarter of FY17 (3QFY17) and 4QFY17. They comprise a new phase of its ongoing H20 Residences project (Block B) worth RM190.9 million in GDV, Park Residensi in Cheras (RM76.5 million) and Riveria, a joint-venture project with Bina Puri Holdings Bhd and Prasarana Malaysia Bhd next to the Tun Sambanthan monorail station in Kuala Lumpur (RM379.3 million).

“These projects would be built over five to seven years,” said Soon Peng.

Titijaya shares closed unchanged at RM1.73 yesterday, bringing a market capitalisation of RM697.8 million.

This article first appeared in The Edge Financial Daily, on Nov 24, 2016. Subscribe to The Edge Financial Daily here.