KUALA LUMPUR (Sept 7): Tanah Makmur Bhd is confident of achieving better earnings in the current financial year ending Dec 31, 2015 (FY15) despite the harsher operating conditions in both the property and plantation sectors.

The optimism hinges on expectations that the take-up rate of its new property township would remain robust plus the contribution from its bauxite mining.

Its chief financial officer Teh Foo Hock said the contribution from its bauxite mining activities will continue to be the main contributor to the company’s earnings in the next two years. The weakening ringgit also augurs well for Tanah Makmur as the mineral is sold in US dollars.

It is understood that the company is producing 50,000 to 100,000 tonnes per month. The average bauxite price is about US$45 (RM193.97) per tonne. An analyst, who tracks the company, anticipates the mining division to generate 30% of its profit this year. The new division is starting at a good time to mitigate the slowdown in oil palm plantation earnings.

When commenting on the company’s property development operation, Teh said, “There is a shortage of residential units in Kuantan. We do not expect a drastic drop in the take-up rate.”

Teh said Tanah Makmur plans to launch RM237 million worth of landed residential units by year end. He pointed out that most of the buyers in Kuantan are first-time buyers who often do not have difficulties getting housing loans.

Tanah Makmur’s property division has an unbilled sales of RM88 million currently, which provides earnings visibility until FY17.

Tanah Makmur, which owns 16,165.47ha of planted area, achieved nearly 60% growth in revenue, which jumped to RM388.9 million in FY14 from RM243.5 million the year before. Its net profit expanded 26% to RM53.87 million from RM42.89 million in FY13.

As for the first half of FY15, Tanah Makmur’s net profit rose 7.15% to RM26.39 million, from RM24.63 million a year ago.

An analyst with a local investment bank, who tracks the company, forecasts 30% earnings growth for FY15 to RM70 million. He reckons that Tanah Makmur’s property development business would not be affected much by the banks’ prudent lending policies while the mining business remains a strong contributor to the group.

According to the analyst, the company’s 30% of profit after tax and minority interest growth is “achievable”. “In fact, I think the number (30% growth) is actually conservative,” the analyst told the digitaledge DAILY.

“The projected growth is definitely achievable, based on the numbers in the first two quarters,” he said.

When asked about the progress of the proposal to relocate and develop the new Pahang state administration complex to Kota SAS, Teh said the state government is awaiting the allocation of funds from the federal government and it is in the finalisation stage.

Tanah Makmur announced in December last year that its subsidiary Kreatif Sinar Gabungan Sdn Bhd, in which it holds a 65% stake, received a non-binding letter of intent (LOI) to develop the complex at Kota SAS. Tanah Makmur closed at four sen or 2.8% higher to RM1.47 last Friday, with 96,000 shares done, for a market capitalisation of RM585.3 million.

This article first appeared in the digitaledge DAILY on Sept 7, 2015. Subscribe here.

SHARE
RELATED POSTS
  1. Malaysia-China Kuantan Industrial Park drew RM31b in investments, created over 14,000 jobs, says deputy Miti minister
  2. Pasdec forms JV to develop residential estate in Kuantan
  3. First super major bridge ‘stitching’ completed along ECRL stretch