Tambun Indah’s unbilled sales at RM343 million in third quarter

Tambun Indah Land Bhd (Dec 18, RM1.43)

Maintain hold with and unchanged target price (TP) of RM1.39: We understand that Tambun Indah Land has secured advertising permits and developer licences (APDL) for Raintree Park 2 and Avenue Garden early this month, after delays of more than half a year.

Both projects have a total gross development value of RM300 million, and have started piling works while waiting for approvals. Given the affordable price range, we gather that the booking rate for Raintree Park 2 (less than RM500,000 per unit) and Avenue Garden has achieved more than 50%.

Avenue Garden is a 17-storey serviced apartment with 312 residential units. The pricing is attractive at RM300 per sq ft, with smaller-sized units costing about RM230,000 each. Avenue Garden is located near to GEMS International School.

To recap, new property sales in the third quarter ended Sept 30, 2015 (3QFY15) fell 13% quarter-on-quarter to RM22 million, bringing nine months of FY15 sales to RM193 million, only accounting for 48% of the company’s initial full-year sales target of RM400 million. This was mainly due to a lack of new project launches with Raintree Park 2 and Avenue Garden waiting for APDL.

With both projects managing to secure APDL, we expect new sales in FY16 to grow strongly to RM420 million. The average take-up rate of ongoing projects is healthy and above 90%. Unbilled sales stood at RM343 million in 3QFY15, representing 0.8 times FY14 revenue. Risks include another delay in new project launches and its concentration on Penang.

Our forecasts remain unchanged as we have already factored in the timing of securing APDL.

Positives include it being a strong beneficiary of rising land prices in Penang mainland, as well as its Pearl City flagship project providing the main earnings driver and potential for more revised net asset value (RNAV)-accretive landbanking exercises. Negatives include its high project concentration in Penang, and delays in new project launches.

We maintain our “hold” call on the stock, with our TP maintained at RM1.39 based on an unchanged discount of 40% to RNAV, with a dividend yield of 5.7%. — Hong Leong Investment Bank Research, Dec 18

This article first appeared in The Edge Financial Daily, on Dec 21, 2015. Subscribe to The Edge Financial Daily here.