Company Result 1 March 2016 Tambun Indah Land Berhad

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1 MALAYSIA INVESTMENT RESEARCH REPORT KDN PP13226/04/2014 (032022) JF APEX SECURITIES BERHAD (47680-X) Company Result 1 March 2016 Tambun Indah Land Berhad Better year ahead sten HOLD Maintained Share Price Target Price RM1.35 RM1.51 Company Description Tambun Indah Land Bhd develops real estate. The Company builds residential projects including attached terrace homes, villas, condominium tower, and bungalows. Stock Data Bursa / Bloomberg code 5191 / TILB MK Board / Sector Main / Property Syariah Compliant status Yes Issued shares (m) Par Value (RM) 0.50 Market cap. (RM) week price Range RM Beta (against KLCI) m Average Daily Volume 0.23m 3-m Average Daily Value^ RM0.31m Share Performance 1m 3m 12m Absolute (%) Relative (%-pts) Major Shareholders % SIRAM PERMAI AMAL PINTAS KIAK SENG TEH Historical Chart Source: Bloomberg Lee Chung Cheng , ext. 758 cclee@jfapex.com.my Result Comment Earnings within our expectation. Tambun Indah Land (TIL) recorded 4Q15 core net earnings of RM23.6m (excluding RM6.7m fair value gain of investment properties), marginally down by 0.8% qoq and yoy. For full year 2015, TIL posted core net profit of RM94.4m (-5.1% yoy), which was in line with our expectation, accounting for 96% of full year net profit forecast but slightly below consensus. Lower full year results. TIL recorded lower core net earnings in 2015 (-5.1% yoy) as compared to 2014, dragged down by lower revenue (-21.2% yoy) as affected by lower new sales achieved and billing progress for its existing projects despite recording higher product margin (GP margin:+7.0ppts yoy). The Group s earnings were mainly underpinned by on-going projects such as Pearl Residence, Pearl Harmoni, Rain Tree Park 1, Straits Garden and Residensi Bukit Kecil. New sales back on track. The Group s 4Q15 new sales rebounded to RM70.3m (versus 3Q15: RM21.8m, 2Q15: RM25.1m and 1Q15: RM146.3m) after successfully obtaining Advertising Permits and Developer Licenses (APDL) for Raintree Park 2 and Avenue Garden, with a combined GDV of RM300m. On top of that, the Group has also secured the authority s approval for another project named Pearl Tropika, with a GDV of RM146m. Overall, TIL recorded RM263.4m new sales for 2015, which was 40% down from RM439m recorded in Similarly, the Group also achieved lower unbilled sales of RM324.2m (mainly derived from Rain Tree Park 1, Rain Tree Park 2 and Straits Garden) as of 4Q15 in tandem with drop in new sales. New launches in pipeline. Moving forward into 2016, TIL plans to launch an additional RM365m GDV of new projects besides banking on the RM222m Raintree Park 2 (gated homes) which was officially launched in Dec last year. New launches include: 1) Pearl Tropika worth GDV of RM146m (2-storey homes); 2) Pearl Saujana Phase 1 worth GDV of RM103m; 3) Pearl 28 worth GDV of RM50m; and 4) Avenue Garden worth RM95m (apartments). Three-pronged strategy to sustain growth. TIL embarked on three approaches to propel its Group s future earnings which include: a) To expand its landbank in and outside Seberang Perai, Penang in view of diminishing Please read carefully the important disclosures at end of this publication

2 existing landbank as current undeveloped landbank of 472 acres, yielding GDV of RM3.2b, will last till 2020; b) To establish recurring income stream. GEMS International School came on board in Sept last year whilst Pearl City Mall is expected to be completed by 1H2016 and start to contribute from 3Q16 onwards. Also, the Group will further develop its Pearl City Business Park; and c) To continue focusing on affordable housings to cater for current demand. Earnings Outlook/Revision We slightly tweaked down our net earnings forecast for 2016F by 1.8% from RM103.3m to RM101.4m (+7.4% yoy) and also introduce our 2017F net profit estimate of RM117.3m (+15.7% yoy). Our new sales assumption for 2016 and 2017 are at RM400m and RM450m respectively. Valuation & Recommendation Maintain HOLD with an unchanged target price of RM1.51. This is based on 30% discount (previously 35% discount) to our revised fully-diluted RNAV/share of RM2.16 (previously RM2.33) after updating the Group s financial figures. Our target price implies 6.4x 2016F fullydiluted PE. Whilst we reckon that the TIL s current valuation is undemanding, i.e. trading at 5.7x 2016F fully-diluted PE, the upside of the stock is capped by prevailing cautious market sentiment on property sector. 2

3 Figure 1: Quarterly Figures Year to 31 Dec (RMm) 4Q15 3Q15 4Q14 qoq (%) yoy (%) yoy (%) Turnover Operating profit Pre-tax profit Net profit Core net profit Operating margin (%) / ppt PBT margin (%) / ppt Figure 2: Financial Summary Year to 31 Dec (RMm) F 2017F Revenue Operating profit Profit before tax Net Profit Core net profit EPS (sen) DPS (sen) P/E (x) P/BV (x) Revenue growth (%) Net profit growth (%) Core net profit growth (%) Operating margin (%) PBT margin (%) Dividend yield (%) Net gearing (%) ROE (%) ROA (%)

4 Figure 3: RNAV On-going projects Remaining GDV Stake DCF of development profits Basis RM(m) (%) BM Residence Cost of equity of 9% Straits Garden Pearl Residence Pearl Impian Pearl Avenue Ph Bkt Residence Camellia Park Permai Residence Pearl Avenue Ph Pearl Harmoni Pearl Tropika Rain Tree Park Rain Tree Park Avenue Garden Central Avenue Alma Kota Permai Pearl City - other phases New Land in Bukit Mertajam Total acres in Pearl City for property investment purposes with CMV of Remaining Landbank values 110.5RM40psf Investment Properties 31.6Book value Net 4Q Warrant proceed m execise price of RM0.60 RNAV Enlarged no. of shares FD RNAV/share

5 JF APEX SECURITIES BERHAD CONTACT LIST JF APEX SECURITIES BHD 6 th Floor, Menara Apex Off Jalan Semenyih Bukit Mewah Kajang Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) PJ Office: 15 th Floor, Menara Choy Fook On No. 1B, Jalan Yong Shook Lin Petaling Jaya Selangor Darul Ehsan Malaysia General Line: (603) Facsimile: (603) DEALING TEAM Kong Ming Ming (ext 3237) Shirley Chang (ext 3211) Norisam Bojo (ext 3233) Institutional Dealing Team: Lim Teck Seng Sanusi Bin Mansor (ext 740) Fathul Rahman Buyong (ext 741) Ahmad Mansor (ext 744) Zairul Azman (ext 746) PJ Office: Mervyn Wong (ext 363) Azfar Bin Abdul Aziz (Ext 822) Tan Heng Cheong (Ext 111) RESEARCH TEAM Lee Chung Cheng (ext 758) Lee Cherng Wee (ext 759) Norsyafina binti Mohamad Zubir (ext 752) Low Zy Jing (ext 754) Nazhatul Shaza Binti Shukor (ext 755) JF APEX SECURITIES - RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS BUY : The stock s total returns* are expected to exceed 10% within the next 12 months. HOLD : The stock s total returns* are expected to be within +10% to 10% within the next 12 months. SELL : The stock s total returns* are expected to be below -10% within the next 12 months. TRADING BUY : The stock s total returns* are expected to exceed 10% within the next 3 months. TRADING SELL : The stock s total returns* are expected to be below -10% within the next 3 months. SECTOR RECOMMENDATIONS OVERWEIGHT : The industry as defined by the analyst is expected to exceed 10% within the next 12 months. MARKETWEIGHT : The industry as defined by the analyst is expected to be within +10% to 10% within the next 12 months. UNDERWEIGHT : The industry as defined by the analyst, is expected to be below -10% within the next 12 months. *capital gain + dividend yield JF APEX SECURITIES BERHAD DISCLAIMER Disclaimer: The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of JF Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report. Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of JF Apex Securities Berhad and are subject to change without notice. JF Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. JF Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against JF Apex Securities Berhad. JF Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of JF Apex Securities Berhad. Published & Printed By: JF Apex Securities Berhad (47680-X) (A Participating Organisation of Bursa Malaysia Securities Berhad) 5