Tambun’s products continue to capture homebuyers

Tambun Indah Land Bhd (March 10, RM1.37)

Maintain buy with an unchanged target price (TP) of RM1.66: After a quiet 2015, Tambun Indah Land Bhd hosted an analysts’ briefing on Wednesday. Managing director Teh Kiak Seng, chief financial officer Steve Neoh and general manager Teh Deng Wei presented their corporate updates.

During the briefing, various questions about approvals were raised given that the company was not able to obtain the advertising permit and developer licence to launch new projects last year. However, we think the concerns should ease temporarily given that the new projects — Raintree Park 2, Avenue Garden and Pearl Tropika — have received the green light to launch. These three projects, with a combined gross development value of RM463 million, have already achieved a booking rate of 60% thus far (Tropika was just released in March, and hence booking rate is low at >20%).

The company has also submitted applications for other pipeline projects, such as Pearl Saujana Phase 1 and Pearl 28, which are slated for launch in the second half of this year. Management has been constantly following up with the authorities for the latest updates. Given the type of products and pricing, we expect Tambun to rake in RM330 million in sales, a 25% growth from RM263.4 million.

We concur with management that affordable landed products will continue to attract owner occupiers. Although another developer in the proximity is selling at RM700,000 to RM800,000 for a terraced house, a similar type of house in Tambun’s established Pearl City township is currently priced at RM450,000 (7% increase year-on-year), which is more affordable for the mass market, and at the same time maintains  the upside in pricing once the property market recovers.

Management has been prudent in its landbanking exercise and the company has accumulated a solid war chest, which would come in handy once opportunities arise. While many land parcels were offered, Teh believes that 2017 would see better opportunities. We agree with his view. Currently, Tambun has a remaining land bank of 675 acres (273.16ha), which should last for another eight years.

We maintain our “buy” rating with an unchanged TP of RM1.66, based on a 35% discount to revalued net asset value. Although the current property market is challenging, we think Tambun has the right products that should continue to capture first-time homebuyers and upgraders from Penang, which have been the trend over the past years. — RHB Research, March 10

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This article first appeared in The Edge Financial Daily, on March 11, 2016. Subscribe to The Edge Financial Daily here.