Results

Within  expectations:  TILB’s  9MFY14  reported PATAMI  of  RM76.3m  came  in  within  expectations, accounting  for  75.4%  and  78.2%  of  HLIB’s  and consensus’ full year forecasts.

Dividends

Declared first single tier interim dividend of 3 sen/share (3QFY13:  2  sen/share).  This  represents  dividend payout and yield of 15.8% and 1.4%, respectively.

We  are  maintaining  our  FY14  dividend  of  9.9  sen  as we expected TILB to declare  a lumpy dividend  in 4Q.

Highlights 

Sustainable  topline  growth.   3Q14  revenue  grew 20.3% yoy to RM116.8 m, driven by increased progress billings,  higher  take- up  rates  of  the  on -going  projects as  well  as  introduction  of  new  development  projects. As  expected,  Pearl  City  @  Pearl  City  remains  the flagship,  and  contributed  circa  67.8%  of  the  total segment revenue  in  3Q14.

Gross  margin  improved.  Gross  margin  in  3QFY14 improved  by  7.7 -ppts,  returning  to  its  usual  >30% region  as  there  were  no  longer  any  provisions  made for  supplemental  development  costs  on  low  cost housing projects  that was incurred  in 2QFY14.

Prospects for  FY14:  TILB have achieved an average take-up  rate  of  86.9%  for  its  on- going  projects,  with total GDV of RM1.2bn. Unbilled sales to date stands at RM457.3m,  representing  1.21x  of  the  group’s  FY13 total revenue.

Risks

• Slowdown in mainland Penang property market (albeit unlikely), as it is 100% concentrated in Penang  and the affordable  segment.

Rating

HOLD

Positives: (1)  Strong  beneficiary  of  rising  land  prices  in  Penang mainland; (2) Pearl City Flagship  will provide the main earnings  driver;  (3)  Undemanding  valuations  –  still trading  at  6.8x  FY15E  P/E;   (4)  Decent  5.2%  DY (FY15E);  and  (5)  Potential  for  more  RNAV -accretive landbanking  exercises.

Negatives: (1)  High project concentration  in Penang.

Valuation

• TP  remained  unchanged  at   RM2.14  (based  on unchanged 10% discount to RNAV), which values TILB at  6.9x  FY15E  P/E,  vs.  10-18x  for  mid/large  cap property  developers.
• Maintain  HOLD  on the stock.

Source: Hong Leong Investment Bank Research - 19 Nov 2014