Highlights

• We attended Tambun Indah’s briefing and walked away feeling neutral. Below are the key takeaways:

• New property sales for FY15 achieved RM263m (fell 40% YoY) mainly due to lack of new launching affected by delay in securing advertising permits and developer licenses (APDL). To note, Tambun only managed to launch Raintree Park 2 with GDV of RM222m in FY15.

• For FY16, Tambun is targeting to launch RM364m worth of new projects with sales target of RM300m (versus RM263m in FY15). Key launches included Avenue Garden (GDV: RM95m), Pearl Tropika (GVD:RM146m), Pearl Saujana (GDV:RM103m) and Pearl 28 (GDV:RM20m).

• Both Raintree Park 2 (RM480k onwards) and Avenue Garden (RM268k onwards) achieved take up rate circa 60% given its affordable pricing.

• Pearl Tropika had already secured APDL and was recently launched in Mar 16 with take up rate of slightly more than 20%. Pearl Saujana – Phase 1 and Pearl 28 are waiting for APDL. We opine that the uncertainty on the timing to secure APDL remains the key concern to the company.

• Another challenge is tightening of loan approval from banks. We understand that current loan rejection rate is high and close to 50%.

• GEMS International School has started operation since Sept 15, while Pearl City Mall is targeted to open in 2Q16. Both investment properties are guided to secure rental yield of 8% per annum.

• Balance sheet is solid with net gearing at merely 0.01x. Tambun maintains its minimum dividend policy of 40% (translating to 5.9% yield) while reserving cash for potential landbanking exercise amid property downturn.

Risks

• Continued delay in new project launches.

Forecasts

• Unchanged.

Rating

HOLD

Positives

• (1) Strong beneficiary of rising land prices in Penang mainland; (2) Pearl City Flagship will provide the main earnings driver; (3) Potential for more RNAV-accretive landbanking exercises.

Negatives

• (1) High project concentration in Penang; (2) Delay in new project launches.

Valuation

• Maintain HOLD on the stock with target price maintained at RM1.39 based on unchanged discount of 40% to RNAV with dividend yield of 5.9%.

Source: Hong Leong Investment Bank Research - 10 Mar 2016