Results

• Above expectations: TILB’s 4Q FY16 core PATAMI increased by 25% YoY, bringing full year of FY16 to RM107m (+13%), accounting for 112% and 106% of HLIB and consensus full year forecasts respectively.

Deviations

• Mainly due to better margin from property development.

Dividends

• None.

Highlights

• YoY: Revenue fell by 10% mainly due to absence of new launches. However, core net profit (excluding fair value gain of investment properties for RM8.9m and RM3.7m fair value loss) increased by 25% mainly due to better product mix and cost saving.

• QoQ: Revenue dropped by 4% but core profit increased by 17% due to the same reason above.

• 4Q16 new sales merely achieved RM18m (versus RM33m in 3Q16), bringing FY16 sales to RM229m, slightly below our sales target assumption of RM243m.

• Given the challenging outlook, sales progress is expected to remain slow. Raintree Park 2 and Pearl Tropika were progressing slowly with take up rate of 56% (versus 55% in 3QFY16) and 41% (versus 37% in 3QFY16) respectively. We gather that difficulty in securing bank financing remains the key challenge in driving new sales.

• For FY17, Tambun targets to launch Pearl Saujana (GDV: RM103m), Pearl 28 (GDV: RM20m) and Palma Residence in Alma (GDV: RM50m).

• In view of the slower sales, we are concerned about the shrinking unbilled sales which had decreased from RM260m to RM200m QoQ, representing only 0.5x FY16’s property development revenue.

Risks

• Delay in new project launches.

Forecasts

• Despite FY16 result coming in above our expectation, we maintain earnings forecast for FY17 and FY18 as we expect slowdown in earnings due to lack of new launches and shrinking unbilled sales.

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 unchanged at RM1.39 based on unchanged discount of 40% to RNAV of RM2.34.

Source: Hong Leong Investment Bank Research - 24 Feb 2017