Highlights

• We visited Tambun Indah’s (TILB) development site along with a small group discussion with the group’s CFO and General Manager.

• TILB have officially launched its first-of-its-kind duplex villas in Raintree Park @ Pearl City in January 2015 (soft launch in December 2014) with favourable booking and take-up rate.

• Of a total of 56 units of duplex villas (price ranging RM370-400k/unit; built-up of 1,500sf), the group have booking rate of 70% with 50% expected conversion to S&P agreement.

• As for the development of Raintree Park @ Pearl City (Phase 1) as a whole (~338 units with GDV of RM164m), the take-up rate currently stands at approximately 50%. Other than duplex villas, Raintree Park also has double-storey link semi-d (21’x45’) and double-storey terrace houses (20’x40’).

• Management shared that majority of its purchasers are genuine buyers, particularly first-home owners as most of its developments are priced below RM500k.

• The group is aiming at about RM500-600m of launches for FY15 but only targets sales to reach RM400m for the year as most of these launches will be in 2HFY15. Hence, we expect sales to spill over into 1HFY16.

• We continue to like TILB as we see potential in the group’s development in mainland Penang as its surrounding areas develops. We also see increasing movement from Penang island to mainland resulted due to growing job opportunities, improved transportation network and relatively more affordable homes.

• Although there is only slight spill over effect from the completion of Penang’s second bridge, we believe this is just temporary as the infrastructure works around the bridge are still on-going and the land in Batu Kawan are still largely undeveloped.

• We are not overly concerned on this matter as the group’s Pearl City is a long-term development that is slated for completed only in 2020.

Risks

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

Forecasts

• Unchanged.

Rating

BUY

Positives

• 1) Strong beneficiary of rising land pricesin Penang mainland; 2) Pearl City Flagship will provide the main earnings driver; 3) Undemanding valuations; 4) Attractive DY

Negatives

• 1) High project concentration in Penang.

Valuation

• Target price remained unchanged at RM2.14 (based on unchanged 10% discount to RNAV). Maintain BUY.

Source: Hong Leong Investment Bank Research - 10 Mar 2015