Results

• Within expectations: TILB’s 9M FY16 core PATAMI increased by 9% YoY, accounting for 80% and 78% of HLIB and consensus full year forecasts.

Deviations

• We deem the result in line as we expect weaker 4QFY16 given the shrinking unbilled sales.

Dividends

• Declared interim dividend of 3sen/share.

Highlights

• YoY: Despite revenue being flat, net profit increased by 6% mainly due to better product mix and cost saving.

• QoQ: PATAMI fell by 12% mainly due to near completion and handover of a few projects.

• 3Q16 new sales merely achieved RM33m (versus RM63m in 2Q16), bringing 9M16 sales to RM211.4m which accounted for 71% of full year sales target of RM300m. In view of subdued market and no new project launching in 3Q and 4Q FY16, we reduce our sales target assumption from RM300m to RM243m.

• Sales of Raintree Park 2 (priced RM480k onwards) and Avenue Garden (RM268k onwards) were progressing slowly with take up rate of 55% (versus 50% in 2QFY16) and 60% (versus 56% in 2QFY16) respectively. Pearl Tropika (GDV: RM146m) which was launched in Mar 16 had secured 37% (versus 30% in 2QFY16) take up rate. We gather that difficulty in securing bank financing remains the key challenge in driving new sales.

• Launching of Pearl Saujana (GDV: RM103m) and Pearl 28 (GDV: RM20m) which have secured APDL in May 16 is likely to be deferred to early 2017 (previous target in 4Q16).

• In view of the slower sales, we are concerned about the shrinking unbilled sales which had decreased from RM311m to RM260m QoQ, representing only 0.7x FY15’s property development revenue.

Risks

• Delay in new project launches.

Forecasts

• FY17 and FY18 earnings are reduced by 16% and 5% post lower sales target.

Rating

HOLD ↔

• Tambun is one of the strong beneficiaries of rising land prices in Penang mainland but near-term outlook is clouded by the delay in in new project launches.

Valuation

• Maintain HOLD with target price adjusted slightly from RM1.40 to RM1.39 post earnings downgrade based on unchanged discount of 40% to RNAV of RM2.34.

Source: Hong Leong Investment Bank Research - 18 Nov 2016