Tambun Indah Land Bhd
(May 29, 76 sen)
Maintain buy with an unchanged target price of 96 sen: Tambun Indah Land Bhd (TIL) recorded a core net profit of RM10.1 million in its first quarter of financial year 2019 (1QFY19) results, which declined 11.4% year-on-year (y-o-y) and 8.2% quarter-on-quarter (q-o-q). 1QFY19’s net earnings account for 20%/24% of our full-year net earnings estimate and consensus respectively.

 
TIL registered a weaker bottom line in this quarter on the back of lower top line (-12% y-o-y, -17.7% q-o-q) following fewer ongoing projects, lower new sales pursuant to fewer new property launches while work in progress of current projects was still at early stage of construction. Moreover, the unfavourable product mix as a result of selling high proportion of affordable housings also dragged down the group’s bottom line (Ebit [earnings before interest and tax] margin: -4.3 percentage points [ppts] y-o-y and -1.4 ppts q-o-q). 1Q FY19 top line was mainly underpinned by projects such as Raintree Park 2, Pearl Saujana Permai and Avenue Garden in Pearl City township, contributing 81% of the group’s revenue.

The group started the year with moderate 1QFY19 new sales of RM32 million, which soared 45.5% y-o-y against RM22 million recorded in 1QFY18 but declined 31.6% q-o-q from RM41.6 million made in 4QFY18. Overall, new sales achieved are in line with our expectations, accounting for 21.3% of our full-year sales target of RM150 million. Meanwhile, TIL’s unbilled sales decreased further to RM20.4 million as of 1QFY19 from the previous quarter of RM23.4 million. Current unbilled sales merely underpin the group’s top line visibility of less than two months, which is 0.11 times of FY18 revenue.

For 2019, TIL targets more new launches with the projects’ gross development value (GDV) totalling RM243 million. These new projects are: i) Palm [email protected] City (comprising 335 units of 18-storey serviced apartment) with a GDV of RM105.7 million; ii) Begonia [email protected] City (comprising 187 units of terraces and town houses) with a GDV of RM84.3 million; and iii) Permai [email protected] Permai (comprising 90 units of terrace houses) with a GDV of RM53 million.

To recap, The group announced earlier that its 70%-owned subsidiary Mustiara Sdn Bhd had made an offer to buy 84.8ha of freehold land, located at the southern side of Pearl City in Seberang Perai Selatan, for a total purchase consideration of RM131 million. No details or GDV being given on the development but we believe the acquisition of the land is an extension to Pearl City, which will allow the group to better plan the township going forward. — JF Apex Securities, May 29