IJM Land 131204-1

PROPERTY DEVELOPMENT

IJM LAND (IJMLD MK, IJMLAND.KL) 4 December 2013

Fast & furious start for Bandar Rimbayu

Company report BUY

Hoy Ken Mak

[email protected]

+603 2036 2294

(Maintained)

Rationale for report: Company Update

Price RM2.59

Fair Value RM3.86

52-week High/Low RM3.30/RM2.01

Key Changes

Fair value unchanged

EPS unchanged

YE to Dec FY13 FY14F FY15F FY16F

Revenue (RMmil) 1,250.1 1,566.8 1,780.2 2,229.2

Core net profit (RMmil) 214.9 284.7 317.5 374.9

EPS (Sen) 14.1 18.4 20.4 24.0

EPS growth (%) 19.1 30.3 10.4 18.1

Consensus EPS (Sen) 20.0 23.9 26.3

DPS (Sen) 5.0 6.0 6.0 7.0

PE (x) 15.3 14.0 12.7 10.8

EV/EBITDA (x) 9.5 10.2 8.8 7.5

Div yield (%) 2.3 2.3 2.3 2.7

ROE (%) 8.2 9.8 9.7 10.5

Net Gearing (%) Net Cash Net Cash Net Cash 0.0

Stock and Financial Data

Shares Outstanding (million) 1,415.6

Market Cap (RMmil) 3,666.5

Book value (RM/share) 1.86

P/BV (x) 1.4

ROE (%) 8.5

Net Gearing (%) n/a

Major Shareholders IJM Corp (64.2%)

EPF (6.5%)

Free Float (%) 24.2

Avg Daily Value (RMmil) 1.9

Price performance 3mth 6mth 12mth

Absolute (%) (6.3) 4.7 24.2

Relative (%) (6.0) (1.4) 16.5

632

953

1,274

1,595

1,916

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1.00

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4.00

Dec-08

Jun-09

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Index Points

(RM)

IJM Land FBM KLCI

Investment Highlights

• Maintain BUY on IJM Land with an unchanged fair value

of RM3.86/share (10% discount to its NAV). We attended

the official launch of The Arc – a social hub at IJM

Land’s Bandar Rimbayu project yesterday.

• We came away impressed with its rapid progress – basic

infrastructure/building works is already in full swing.

Apart from The Arc, a link-road Kota Kemuning is now

ready. Another access road to SKVE/ELITE should be

completed within two years along with a clubhouse.

• Bandar Rimbayu enjoys excellent connectivity to five

major highways and is a mere five-minute drive to Kota

Kemuning and ~3km away from a future link to

SKVE/ELITE via Bandar Saujana Putra.

• With its strategic location, well-crafted designs (ring

concept/low-density layout) & green-themed landscape,

Bandar Rimbayu is on an accelerated growth path –

much like how well-established townships such as Desa

Park City and Setia Alam were in their early years.

• Despite the government’s recent ‘cooling measures’ on

the property market, we expect Bandar Rimbayu to

continue its forward march. Rising land prices within KL

city centre are triggering an outward migration towards

outlying areas – particularly for landed products. Hence,

its reasonably-priced landed units are well-placed to tap

into an expanding upgraders’ market.

• Furthermore, Bandar Rimbayu’s deepening prospects

will likely receive a significant kick as the increasing

presence of reputable developers nearby should

expedite capital values within this matured but fast-

expanding South Western corridor of Klang Valley.

• The original land cost for Bandar Rimbayu is only

RM5psf, compared to ~RM18psf (based on NPV) that

Tropicana Corp has paid for 1,172 acres of land near

Bandar Rimbayu (total cost: ~RM1.3bil). Our channel

checks reveal that several other developers are eyeing

another large parcel of land (~1,000 acres) within the

vicinity.

• Phase 1 (Chimes) & 2 (Perennia) of Bandar Rimbayu

have already achieved strong take-up rates of over 85%

and 70% since their launches in March and late-August

respectively (non-bumi portion: fully-taken-up).

• The starting price for Phase 3 of Bandar Rimbayu - to be

launched in Jan-2014 (cluster-semi-detached homes) -

will likely be higher at over RM800k compared with

~RM580k and RM640k for Phases 1 & 2 respectively. We

IJM Land

OTHER TAKEAWAYS FROM

RIMBAYU SITE VISIT

� ‘The Arc’ officially launched

We attended the official launch of The Arc, a social

centrepiece at its Bandar Rimbayu project near Kota

Kemuning. Bandar Rimbayu is a JV with Kumpulan

Europlus under a 60:40 partnership.

Key management of both IJM Land and parent IJM Corp

were present at the event. They include Tan Sri

Krishnan Tan (Chairman of IJM Corp), Dato’ Teh Kian

Meng (MD of IJM Corp), Dato’ Soam Heng Choon (

of IJM Land and Deputy MD of IJM Corp), Edward

Chong (COO of IJM Land) and Shuy Eng Leong (COO

of Bandar Rimbayu).

The Arc measures approximately 100,000 sq ft,

aimed at creating a space social interaction within the

Bandar Rimbayu community. It is centrally located within

the Flora precinct that mainly consists of linked homes.

Management shared that The Arc’s early launch near

the entrance to IJM’s first two phases near Kota

Kemuning (i.e. Chimes and Perennia) is also

showcasing something tangible for its future home

buyers/investors.

� Major infrastructure works underway

We came away impressed with what we saw from this

green-themed project, IJM’s largest ever township

development to-date (1,878 acres).

CHART 1: STRATEGIC

Source: IJM Land, AmResearch

BANDAR

We attended the official launch of The Arc, a social

project near Kota

a JV with Kumpulan

Key management of both IJM Land and parent IJM Corp

. They include Tan Sri

Krishnan Tan (Chairman of IJM Corp), Dato’ Teh Kian

am Heng Choon (MD

Corp), Edward

Chong (COO of IJM Land) and Shuy Eng Leong (COO

The Arc measures approximately 100,000 sq ft, and is

aimed at creating a space social interaction within the

It is centrally located within

consists of linked homes.

early launch near

two phases near Kota

also aimed at

for its future home

Major infrastructure works underway

We came away impressed with what we saw from this

s largest ever township

Basic infrastructure works are also in full swing

IJM Land is clearing huge swathes of previously

plantation land. The road link to Kota Kemuning has

been completed and is now accessible to

We understand that the first batch of residents at Bandar

Rimbayu would use this road as an exit point out of the

township.

On the other hand, a second access road is currently

being built. It links Bandar RImbayu to Bandar Saujana

Putra, and subsequently to ELITE/South Klang Valley

Expressway (SKVE).

To further enhance its appeal, IJM Land is set to

clubhouse that will likely be ready in two to three years’

time.

� Cutting-edge connectivity

A key attraction of Bandar RImbayu is its unparel

access to five major highways – out of which four

existing ones.

Bandar Rimbayu straddles SKVE

immediate southern boundary; KESAS/Lebuhraya

Kemuning Shah Alam (LKSA) to the north via Kota

Kemuning; ELITE highway to the East and the

West Coast Expressway (WCE) to the west.

Most importantly, Bandar RImbayu is a mere five

minutes’ drive away from Kota Kemuning

3km away from Bandar Saujana Putra en

ELITE/SKVE.

STRATEGIC LOCATION OF BANDAR RIMBAYU

4 December 2013

re works are also in full swing – where

IJM Land is clearing huge swathes of previously

The road link to Kota Kemuning has

been completed and is now accessible to traffic.

We understand that the first batch of residents at Bandar

Rimbayu would use this road as an exit point out of the

On the other hand, a second access road is currently

being built. It links Bandar RImbayu to Bandar Saujana

sequently to ELITE/South Klang Valley

To further enhance its appeal, IJM Land is set to build a

clubhouse that will likely be ready in two to three years’

A key attraction of Bandar RImbayu is its unparelled

out of which four are

Bandar Rimbayu straddles SKVE at the latter’s

immediate southern boundary; KESAS/Lebuhraya

Kemuning Shah Alam (LKSA) to the north via Kota

Kemuning; ELITE highway to the East and the proposed

West Coast Expressway (WCE) to the west.

Bandar RImbayu is a mere five

minutes’ drive away from Kota Kemuning – and only

3km away from Bandar Saujana Putra en-route to

IJM Land 4 December 2013

AmResearch Sdn Bhd 3

� Phase 3: to be launched early-2014

Leveraging on the early successes of Phases 1 & 2

(Chimes and Perennia), we expect IJM Land to launch

Phase 3 of Bandar Rimbayu by January 2014.

From our observations, Bandar Rimbayu’s homes offer

relatively generous built-ups. The standard intermediate

unit for Phases 1 (22’x75’/24’x75’) & 2 (22’x80/24’x80’)

measure c.2,100 sq ft and 2,500 sq ft respectively on

average.

We also observed that a corner-lot show unit (24’x75’)

with an additional 3 feet of land area can feet an island

kitchen. The maid rooms for some also come with a

detached toilet at the back.

The first batch of homes under Phase 1 is due to be

completed earliest by end-2014 – where work progress

for some units has already reached 65%.

Phase 3 will mainly comprise over 400 units of cluster

semi-detached homes with built-ups of 32’x70’.

This would be followed suit by Phases 4 and 5 that will

come with linked detached homes and strata-titled units

respectively as well as shop lots under Phase 6 by

4Q14.

We understand that IJM Land would likely launch 40

units of shop lots to kick off the commercial component

of this township. We expect the indicative pricing to be

RM1mil and above, and will either be three or four

storeys.

Other components in the future may include a retail mail,

schools, hospitals, big box retail outlets as well as a

town square.

Once this self-contained township achieves a certain

level of maturity, we expect IJM Land to introduce the

Bayu precinct – offering high-end waterfront products

that are similar to The Light’s project in Penang.

� Providing sustainable pre-sales of over RM1bil from FY14F onwards

We anticipate Bandar Rimbayu’s pre-sales to reach

~RM1bil next year vs ~RM600mil this year – providing

IJM Land with a sustainable GDV base over its

development period of 10 to 15 years. The project’s total

indicative GDV is estimated at ~RM11bil.

IJM Land delivered strong new sales of RM1.2bil for

1HFY14 – putting the group on track to beat the RM2bil

achieved for the whole of FY13.

The strong progress billings during the first half of the

current financial year were partly down due to maiden

contributions from ongoing building works for Phase 1 of

Bandar Rimbayu.

Physical progress at some units of Phase 1 has already

reached 65%.



PICTURE 2: PROGRESS AT PHASE 1 (CHIMES) - ALREADY REACHING THE ROOF


PICTURE 1: PROGRESS AT PHASE 2 (PERENNIA) – WORKS UNDERWAY




PICTURE 3: OFFICIAL OPENING OF THE ARC


PICTURE 4: ARIAL VIEW OF THE ARC




PICTURE 5: PROPOSED LINK FROM BANDAR RIMBAYU TO SKVE/ELITE


PICTURE 6: SHOW HOUSE (24’X75’ – CORNER LOT)




TABLE 1 : FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) 2012 2013 2014F 2015F 2016F

Revenue 1,206.0 1,250.1 1,566.8 1,780.2 2,229.2

EBITDA 261.4 315.3 391.0 455.9 559.3

Depreciation (8.0) (8.8) (9.3) (9.6) (9.9)

Operating income (EBIT) 253.5 306.6 381.7 446 549.4

Other income & associates (7.0) (10.1) 16.4 15.8 36.7

Net interest 35.3 23.6 21.6 23.4 22.5

Exceptional items 0.0 0.0 13.9 0.0 0.0

Pretax profit 281.9 320.1 433.6 485.5 608.6

Taxation (81.6) (89.0) (108.4) (121.4) (153.9)

Minorities/pref dividends (6.6) (16.2) (26.6) (46.6) (79.8)

Net profit 193.7 214.9 298.6 317.5 374.9

Core net profit 193.7 214.9 284.7 317.5 374.9

Balance Sheet (RMmil, YE 31 Dec) 2012 2013 2014F 2015F 2016F

Fixed assets 175.8 176.2 179.0 181.4 183.6

Intangible assets 0.0 0.0 0.0 0.0 0.0

Other long-term assets 1,387.8 1,698.9 1,795.9 1,894.6 2,015.7

Total non-current assets 1,563.6 1,875.1 1,974.9 2,076.0 2,199.2

Cash & equivalent 625.3 607.9 529.1 492.0 281.2

Stock 178.0 166.8 198.4 223.5 281.8

Trade debtors 623.2 456.3 579.5 575.5 671.8

Other current assets 1,476.3 1,973.5 2,526.9 2,762.0 3,353.6

Total current assets 2,902.8 3,204.6 3,833.9 4,053.1 4,588.3

Trade creditors 666.7 808.3 1,127.5 1,197.3 1,509.7

Short-term borrowings 112.8 110.7 121.0 125.0 126.0

Other current liabilities 1.9 13.4 13.4 13.4 13.4

Total current liabilities 781.5 932.5 1,261.9 1,335.7 1,649.1

Long-term borrowings 286.8 414.1 363.8 339.8 323.8

Other long-term liabilities 918.2 1,039.8 1,039.8 1,039.8 1,039.8

Total long-term liabilities 1,205.0 1,453.9 1,403.6 1,379.6 1,363.6

Shareholders’ funds 2,429.6 2,626.8 3,050.1 3,274.0 3,555.2

Minority interests 50.4 66.6 93.2 139.7 219.6

BV/share (RM) 1.75 1.86 1.95 2.10 2.28

Cash Flow (RMmil, YE 31 Dec) 2012 2013 2014F 2015F 2016F

Pretax profit 281.9 320.1 433.6 485.5 608.6

Depreciation 196.3 251.4 (243.0) 0.6 (174.0)

Net change in working capital (231.5) (156.9) (389.0) (186.4) (433.7)

Others (7.6) (22.0) (221.6) (234.4) (285.9)

Cash flow from operations 50.8 150.0 (167.7) 74.3 (101.1)

Capital expenditure (4.5) (7.1) (10.0) (10.0) (10.0)

Net investments & sale of fixed assets 0.1 0.0 0.0 0.0 0.0

Others (166.2) (201.4) 14.2 12.3 8.9

Cash flow from investing (170.6) (208.5) 4.2 2.3 (1.1)

Debt raised/(repaid) 51.4 125.2 (40.0) (20.0) (15.0)

Equity raised/(repaid) 45.6 36.8 195.4 0.0 0.0

Dividends paid (55.0) (55.9) (70.8) (93.6) (93.6)

Others 11.1 (69.6) 0.0 0.0 0.0

Cash flow from financing 53.2 36.4 84.7 (113.6) (108.6)

Net cash flow (66.6) (22.1) (78.9) (37.0) (210.9)

Exchange rate effects 0.5 4.8 0.0 0.0 0.0

Net cash/(debt) b/f 691.4 625.3 607.9 529.1 492.0

Net cash/(debt) c/f 625.3 607.9 529.1 492.0 281.2

Key Ratios (YE 31 Dec) 2012 2013 2014F 2015F 2016F

Revenue growth (%) 3.8 3.7 25.3 13.6 25.2

EBITDA growth (%) n/a 20.6 24.0 16.6 22.7

Pretax margins (%) 23.4 25.6 27.7 27.3 27.3

Net profit margins (%) 16.1 17.2 19.1 17.8 16.8

Interest cover (x) 7.7 9.1 10.1 12.1 15.1

Effective tax rate (%) 28.9 27.8 25.0 25.0 25.3

Net dividend payout (%) 24.5 31.9 21.1 25.4 26.9

Debtors turnover (days) 180 158 121 118 102

Stock turnover (days) 62 50 43 43 41

Creditors turnover (days) 227 215 225 238 222



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Published by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group) 1 5 t h F l oo r B a n g un a n A mB a n k Gr o u p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 0 3 ) 207 0- 2 4 4 4 ( r e se ar c h ) F a x: ( 0 3 ) 207 8- 3 1 6 2

Printed by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group) 1 5 t h F l oo r B a n g un a n A mB a n k Gr o u p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 0 3 ) 207 0- 2 4 4 4 ( r e se ar c h ) F a x: ( 0 3 ) 207 8- 3 1 6 2

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.

For AmResearch Sdn Bhd

Benny Chew Managing Director

Documents

IJM Land 131204-1