IJM Land (AmResearch) buy; fair value RM4.00

Investment Highlights

• We maintain our BUY rating on IJM Land and raise our fair value from RM3.88/share to RM4.00/share – based on an unchanged 10% discount to our revised fully-diluted NAV of RM4.45/share.

• We lift our FD NAV from RM4.31/share to RM4.45/share to reflect more aggressive pricing assumptions in future presales given the return of pricing power to developers from the rebound in transaction volume.

• We have raised our earnings estimate for FY12F by 3% to RM285mil. This is to account for higher average selling prices, translating to an increase in presales to RM1.7bil in FY12F (FY11F: RM1.3bil), from our previous forecast of RM1.6bil. We introduce FY13F earnings at RM314mil, a 10% YoY growth.

• FY11F (March) results should be announced in mid-May 2011. We expect record earnings of RM218mil (2x FY10), underscoring our belief in the management. The record earnings would also solidify its status as one of the largest developers. PE expansion appears imminent.

• IJM Land is moving to capitalise on the maturity of its Seremban II township by divesting 15-20 acres of commercial land to Mydin hypermarket. Such a move should also accelerate the development potential of the balance 300 acres of commercial land.

• As of end-March 2011, IJM Land’s total unbilled sales stood at RM1bil. Both Light Collections I & II are now more than 65% sold. Reclamation work for Phase II of The Light would commence in 3Q11, and to be completed within 18 months.

• It would soon commence the infrastructure- and earthworks for its 50%-owned Canal City (1,877 acres). Acquired for about RM5psf, Canal City is slated for launch in 2012 to take advantage of the lack of affordable landed homes priced below RM350,000/unit in the suburbs.

• Parent IJM Corp would be converting RM400mil of RCULs into 229mil new shares in IJM Land, raising its stake from 61% to 68%. IJM Land’s market cap would expand from rd RM3,136mil to RM3,777mil, making it the 3 largest property player in the exchange.

• The enlargement to its market capitalisation (+20%) with the associated increase in index weighting should underpin share price performance.

• Valuations are very attractive, - trading on forward multiples of between 12x-15x, EPS CAGR of 39% over FY11F-FY13F, and 37% discount to FD NAV.

• Despite its deep value, IJM Land’s share price needs to get a kick from a meaningful land deal to reinvigorate excitement on the stock. This may soon take place.