News

TILB  have  announc ed  that  the  conditional  S&P agreement  between  Palmington  Sdn  Bhd  (whollysubsidiary  of  TILB)  and  TPPT  Sdn  Bhd  had  been terminated  due  to  non - fulfilment  of  a  condition precedent.

The  mentioned  termination  of  agreement  is  with regards  to  the  group’s  land  acquisition  which  was announced  on  4  June  201 4,  acquiring  209.5  acres  of land in Seberang Prai for  RM150m cash , or RM16.43 psf.   The  land  is  adjacent  to  its  flagship  Pearl  City development  on  Penang  mainland.   No  prospective GDV was mentioned  in the announcement

Financial impact

We do not expect any financial  impact to TILB  on the termination  of  agreement  as  the  proposed  land acquisition is planned to be developed over the longer term (4-5  years later).

Comments 

We  are  negatively  surpris ed  by  the  announcement  by TILB given that the land acquisition would further boost the group’s  landbank  in Pearl City by more than 40%.

No  specific  reasons  were  being  disclosed  behind  the termination  of  the  agreement.  That  said,  TILB  will  be refunded the deposit paid  within 21 working date  from the  notice  of  termination,  which  amounts  to  RM15m, without interest.

Despite  that,  TILB  will  continue  to  seek  for  more opportunities to build up its landbank further  for future intended  developments.

Risks

• Slowdown  in  mainland  Penang  property  market (unlikely), as it is 100% concentrated  in Penang.

Forecasts

• Unchanged as any intended development on the 209.5 acres of land would  only commence 4-5 years later.

Rating

HOLD

Positives

• Strong  beneficiary  of  rising  land  prices  in  Penang mainland;
• Pearl  City  Flagship  will  provide  the  main  earnings driver;
• Undemanding  valuations  –  still trading  at  6.7x  FY15E P/E.
• Attractive  5.9% DY (FY15E).

Negatives

• High project concentration  in Penang.

Valuation

We  have  re-adjusted  our  RNAV  estimates  by elimination the  impact  of the land  acquisition of which we have earlier factored in (209.5 acres with estimated GDV  of  RM1.36bn).  Post -adjustment,  we  reduced  our TP  from  RM2.60  to  RM2.14  (based  on  unchanged 10%  discount  to  RNAV).  Recommendation  is downgraded  to HOLD.

Source: Hong Leong Investment Bank Research - 12 Nov 2014