Titijaya Land to leverage on CREC’s strength

KUALA LUMPUR (June 5): Titijaya Land Bhd plans to leverage on the strength of its partner China Railway Engineering Group Ltd (CREC), one of the world’s largest construction companies, to pursue large scale, capital-intensive construction projects.

“We look forward to leveraging on its strength as a construction contractor for big projects such as reclamation works, although we have not considered any yet,” Titijaya chief financial officer Edmund Tan Kian Whoo told The Edge Financial Daily in an interview.

“We are keeping our options open. If we can work with local companies we would do so, but it depends on their skills and knowledge.

“We cannot say what the future partnership share would be as it depends on the projects. Of course, as a partner, CREC depends on us for quick approvals if they want to embark on local projects. For now, they are involved in single land projects. If there are other projects, we will set up another company for that,” said Tan.

He also noted that the China-owned CREC is a financially strong company, and required payments to be settled only after 50% of the construction is complete, thus easing Titijaya’s cash flow.

On whether there are concerns arising from the termination of Iskandar Waterfront Holdings and CREC consortium’s RM7.41 billion share sale deal in relation to Bandar Malaysia Sdn Bhd, Tan said Bandar Malaysia is a separate matter and that the aborted deal has no impact on Titijaya’s relationship with CREC.

“CREC has construction completion skills, which means there is no risk of projects being abandoned,” he said.

Titijaya is partnering CREC to jointly develop The Shore in Kota Kinabalu, Sabah, and 3rdNvenue in Jalan Ampang here in Malaysia, which have a combined gross development value (GDV) of RM2.57 billion.

“We will be promoting these [high-end] units at The Shore and 3rdNvenue in several cities in China in the second half of 2017 (2H17). We are doing this for the first time with the help of CREC,” said Tan.

Meanwhile Titijaya expects growth of its revenue to be flat this financial year ending June 30, 2017 (FY17), before accelerating to low double-digit growth in FY18 and taking off in FY19 and FY20 through the sales of ongoing and upcoming projects.

According to Tan, the property developer, which saw revenue rise 17.4% to RM400.08 million in FY16, will likely see revenue remain at this level in FY17 amid soft market conditions.

The higher FY16 turnover notwithstanding, annual net profit eased 15.6% to RM68.34 million that year from RM80.94 million in FY15.

For the nine months ended March 31, 2017, net profit has climbed 11.8% to RM59.72 million, though revenue is down 11.8% to RM258.7 million.

Nevertheless, while some developers have deferred the launch of new projects, Titijaya said it is on track to achieve its RM300 million sales target for FY17.

The group is launching five projects in 2H17 comprising The Shore, 3rdNvenue, Damansara West in Bukit Raja, Selangor, Riveria Sentral in Brickfields here and Block B of H2O Residences in Ara Damansara, Selangor. These projects are expected to be completed in six to seven years.

Tan said Titijaya, which is repositioning itself as an affordable housing developer where its units will range between RM300,000 and RM600,000, will allocate 20% of the projects for units above RM1 million.

Titijaya has outstanding unbilled sales of RM471 million and it has in the pipeline projects with a total GDV of RM1.8 billion to be launched in FY18.

Tan said Titijaya’s total land bank for development stood at about 117.35ha in the central region, Penang and Sabah, with a total GDV of RM13 billion, which will keep the group busy until 2027.

Titijaya shares closed unchanged at RM1.60 last Friday, giving it a market capitalisation of RM645.33 million.

This article first appeared in The Edge Financial Daily, on June 5, 2017.

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