Tambun Indah Bhd
(June 5, RM2.06)
Maintain buy with target price of RM2.23: Tambun Indah has proposed to acquire 27 parcels of development land located within Mukim 15 in Seberang Perai Selatan district, Penang (measuring approximately 209.54 acres [84.8ha]) for a total consideration of RM150 million (RM16.40 per sq ft [psf]).
The land purchase is expected to be completed by the fourth quarter of calendar year 2014 and it will be developed as part of the existing township, with an estimated gross development value (GDV) of around RM1 billion. It is expected to be developed in the next three years.
Since the land is located adjacent to Tambun Indah’s Pearl City development, the company already has a ready catchment area and it will also capitalise on Pearl City’s branding and existing infrastructure.
It plans to develop gated strata residences, which will be launched in 2017.
We expect good take-up rates for this development due to: (i) the catchment within a matured area with ready amenities; (ii) its appeal among the younger population and Penang island residents who wish to upgrade to more spacious homes; and (iii) convenience of accessibility via the second bridge.
We believe the land price of RM16.40 psf is considered low compared to the current market price in the surrounding area of RM20 to RM30 psf. Moreover, the land cost is just 15% of the GDV which is still below the average land cost of 20% of GDV. This new acquisition will add a GDV of RM1 billion to Tambun Indah’s current remaining GDV of RM2.5 billion.
We maintain our financial year 2014 ending Dec 31 (FY14) and FY15 forecasts and our target price of RM2.23 based on a blended price-to-book value of 1.3 times and price-earnings ratio of 13 times as it reflects better on the market and the stock price.
We expect resilient demand for Tambun Indah’s projects going forward as well as more opportunities from new foreign direct investments. — BIMB Securities Research, June 5
This article first appeared in The Edge Financial Daily, on June 6, 2014.
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