Results

• Above expectations: TILB’s 1H FY16 core PATAMI increased by 11% YoY, accounting for 62% and 53% of HLIB and consensus full year forecasts.

Deviations

• Mainly due to higher progress of revenue recognition.

Dividends

• None.

Highlights

• 2QFY16 PATAMI increased by 21% QoQ and 67% YoY mainly due to higher progress of revenue recognition, especially from Rain Tree Park, Avenue Garden and Straits Garden. Revenue was mainly contributed from Pearl City, which accounted for 91% of total revenue. Average take up rate from on-going projects remained encouraging at 80%.

• 2Q16 new sales achieved RM63m (versus RM116m in 1Q16), bringing 1H16 sales to RM178m which accounted for 59% of full year sales target of RM300m (versus RM263m in FY15).

• Raint ree Park 2 (RM480k onwards) and Avenue Garden (RM268k onwards) sales were progressing slowly with take up rate of 50% and 56% respectively. Pearl Tropika (GDV: RM146m) which was launched in Mar 16 had secured 30% take up rate. We gather that di fficulty in securing bank financing remains the key challenge in driving new sales.

• Pearl Saujana (GDV: RM103m) and Pearl 28 (GDV: RM20m) have just secured APDL in May 16 and are targeted for launch in 4Q16.

• Unbilled sales shrank from RM354m to RM311m, representing only 0.84x FY15’s property devel opment revenue.

Risks

• Delay in new project launches.

Forecasts

• FY16 earnings forecast is raised by 15% after factoring in higher progress of revenue recognition but FY17 earnings forecast is maintained due to concern on shrinking unbilled sales.

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 raised from RM1.39 to RM1.40 post earning upgrade based on unchanged discount of 40% to RNAV.

Source: Hong Leong Investment Bank Research - 12 Aug 2016