FY18 to see flat profit growth despite stronger 9M — Titijaya

KUALA LUMPUR (July 2): Developer Titijaya Land Bhd may have achieved a marginally stronger performance in its first nine months of the 2018 financial year (FY18), but the group is not expecting its earnings to improve by much for the full year, due to the prevailing weak buying sentiment, according to deputy group managing director Lim Poh Yit.

The group’s net profit for FY17 ended June 30, 2017, was up 12% year-on-year to RM76.74 million from RM68.34 million.

In the nine months ended March 31, 2018 (9MFY18), its net profit was up 4% year-on-year to RM62.25 million versus RM59.72 million previously, mainly due to completion of its Primrose project, progress work done at its H20 project, sales of completed stock at Zone Innovation, and the partial compulsory land sale in Penang to the government for road widening work. Turnover jumped 26% y-o-y to RM326.54 million from RM258.7 million.

Lim told The Edge Financial Daily in a recent interview that “we expect the top and bottom line growth in FY18 to be flat” as the property market remains soft, while most financial institutions are still strict in their lending. Hence, like many developers today, he said Titijaya faces the issue of high loan rejection rate among its potential customers, which is hampering sales growth.

But on a more positive note, he said the property market has been resilient as the country’s economy strengthens. He expects this year and the next to see more opportunities for product differentiation and greater absorption of current overhang of properties, less speculation, as well as a moderate increase in property prices that reflect “a more realistic demand”, said Lim.

Another positive is the affordable property market segment, which has continued to show favourable response, said Lim. The new Pakatan Harapan government, which has zero-rated the goods and services tax, is also seen as positive for the property market, he said.

“The zero-rated GST does have a positive impact on the overall sales of property products, particularly commercial property as the 6% savings can be quite substantial to the purchasers.

“With the new government formed, we believe the government will look into the property industry once other policies that are of higher priority have been settled. We believe affordable homes will still be a focus area for the government, as this is one of the most challenging issues plaguing Malaysia,” Lim said, adding this will also benefit Titijaya, which he believes is well-positioned to meet demands in this segment.

The group is looking to achieve a higher sales target of up to RM500 million in FY18, said Lim, with the group’s new projects being largely in the affordable housing segment. “Our sales target for FY18 is RM400 to RM500 million, as compared to RM355 million in FY17. Our competitive strength lies in our ability to identify and analyse the market’s needs and determine the feasibility of our products accordingly,” Lim said.

As at 9MFY18, Titijaya had achieved total sales of RM284 million, mainly contributed by the first phase of its 3rdNvenue project in Jalan Ampang, the H2O development in Ara Damansara, and The Shore in Sabah. Sales in the remaining quarter of FY18 will also be driven by the same projects. Its unbilled sales as at end-March stood at RM380 million.

In the second half of 2018, Titijaya intends to launch three projects with a combined gross development value of RM826 million, comprising two developments in Kuala Lumpur and one in Subang, Selangor. They are: the second phase of 3rdNvenue which has a RM338 million GDV; Riveria City at KL Sentral (RM320 million), and Damaisuria in Subang (RM168 million).

Lim said the group has sufficient funds to finance its pipeline projects as it just did a cash call last year, so no new fund-raising exercise is expected in the near future.

He also said the group’s landbanking strategies, meanwhile, will focus on synergistic alliances, instead of purchasing land directly, which would incur hefty upfront payments and stretch the group’s balance sheet. In addition, Titijaya is looking into unlocking value from the group’s assets, he said, but did not elaborate. The group has an undeveloped land bank of about 208 acres, with a potential GDV of RM12 billion.

Shares in Titijaya touched their lowest level of 37 sen on May 31, since the company’s IPO debut back in November 2013. Last Friday, the counter closed at 38.5 sen, giving it a market capitalisation of RM517.51 million. Year to date, the stock has declined 44%.

This article first appeared in The Edge Financial Daily, on July 2, 2018.

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