Results

• Within expectations: TILB’s 1QFY16 core PATAMI fell by 2%% QoQ, accounting for 28% and 24% of HLIB’s and consensus’s full year forecasts.

Deviations

• We deem the result inline as the higher progress of revenue recognition in 1Q16 is expected to normalise in the subsequent quarters.

Dividends

• None.

Highlights

• 1QFY16 PATAMI fell by 2% QoQ and 32% YoY mainly due to delay in launching new projects. Revenue was mainly contributed from Pearl City, which accounted for 83% of total revenue. Average take up rate from on-going projects remained healthy at 77%.

• New property sales increased from RM70m to RM116m mainly due to contribution from Avenue Garden, Raintree Park 2 and Pearl Tropika. Full year sales target of RM300m (versus RM263m in FY15) should be achievable as 1Q16 sales already achieved 39% of full year target.

• Both Raintree Park 2 (RM480k onwards) and Avenue Garden (RM268k onwards) achieved booking rate as of April 16 of circa 60% given its affordable pricing.

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

• Unbilled sales increased slightly from RM324m to RM354m, representing 1x FY15’s property development revenue.

• Pearl Tropika had already secured APDL and was recently launched in Mar 16 with take up rate of slightly more than 20% and booking rate of 40%. Pearl Saujana – Phase 1 and Pearl 28 are in the process of applying APDL. We opine that the uncertainty on the timing to secure APDL remains the key concern to the company.

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 5.8%.

Source: Hong Leong Investment Bank Research - 19 May 2016