Fair Value : RM2.89 | Recom : Outperform

The Light in focus. We recently met with Mr Toh Chin Leong (GM of the Northern Region) in Penang. While the stories on IJMLD have very much been centered on Rimbayu in the recent months, with the handover of Light Linear in Oct, The Light project has actually achieved another significant milestone since its maiden launch in 2009.

Witnessed the completion of Light Linear – seeing is believing. The Light Linear is beautiful. We toured around the whole condo project and saw the nicely done landscapping and amenities. We also entered into one of the completed units on 15th floor. The unit has an unblocking seaview, with ongoing construction works for The Collection I in front. The completed units are now changing hands at RM550-600 psf in the secondary market compared to RM370 psf during the first launch. An MNC is also taking up 30 units for its expats, offering a monthly rental of RM4,000/unit. The successful delivery of the first phase has significantly boosted the buyers’ confidence. Collection III (GDV RM350m) has seen a booking of 50%. The units, comprising medium-rise super condos, duplexes and seafront watervillas, are priced at RM650-1,200 psf. Collection IV, which is estimated to have a GDV of RM350-370m, is targeted to be launched in 1Q2013. IJMLD’s 1HFY13 property sales have accelerated to RM900m, and could potentially exceed its full-year target of RM1.5bn.

Phase 2 is another excitement. Reclamation works on Ph. 2 (100 acres) are 60% completed. Ph. 2 will serve as another boost for the entire project, which should spillover to the residences in Ph. 1. Negotiation on the six components (3 hotels, a retail mall, a convention centre and a performing arts centre) covering 38 acres of land is currently ongoing. Reputable international hotel operators have been engaged, and Suntec has signed the management and marketing agreement to operate the convention centre. The participation of these top-notch players should spur more interest on this commercial phase, particularly the retail mall. Given the scale and the model, we believe IJMLD is more likely to look for strategic partners to undertake part of the project than fund raising. If this materialises, we believe the land could fetch a market price of more than RM300 psf, which is justifiable given the fruition of Light Linear. IJMLD stands to make a gain on the land parcel.

Risks – Downside to economic growth, dampening demand for property.

Forecast. Unchanged.

Reiterate Outperform. With key anchor projects – The Light Ph. 2, Rimbayu, Sebana Cove and Pantai Dalam lining up nicely over the intermediate term, IJMLD is emerging strongly to the top of the league. The stock remains our top pick for the sector. Fair value is kept at RM2.89, at 15% discount to RNAV.

Source: RHB Research - 23 Oct 2012