Results

• Within Expectations: TILB’s 1H17 core PATAMI of RM44m came in within our expectation but slightly below consensus, accounting for 56.3% and 49.1% of HLIB and consensus full year forecasts.

Deviations

• The results are deemed in line as we expect earnings continue to decline due to shrinking unbilled sales.

Dividends

• None.

Highlights

• QoQ: Revenue dropped by 12.9% due to fewer on-going projects given that they are nearing completion and handover, while two projects (Pearl 28 and Pearl Saujana 1) launched in 2Q17 are at an early stages of construction. However, core profit declined by 16.3% in tandem with lower revenue as well as higher expenses.

• YoY: Revenue fell by 32.8% mainly due to lower new property sales in the absence of new launches. Meanwhile, core net profit declined by 29.7% mainly due higher cost but partly aided by lower effective tax rate.

• YTD: Core net profit declined by 15.5% mainly due to fewer on-going projects and lower new sales, mitigated by lower effective tax rate.

• In 2Q17, total new sales achieved RM47.9m (RM62.7m in 2Q16), bringing year to date sales to RM82.9m, on course to meet FY17 sales target of RM180m.

• We note that higher new sales achieved for the past two quarters are the notable positives while the average take up rate declined slightly to 78.7% from 82.7% in 1Q17 due to the launches of new projects recently.

• We understand that the recent launches of Pearl Saujana (GDV: RM103m) and Pearl 28 (GDV: RM20m) are garnering positive responses and are expected to contribute positive to sales in coming quarters.

• On a side note, we are wary of the earnings sustainability moving forward given the shrinking unbilled sales at only RM132m, which had decreased significantly from RM311m a year ago, representing only 0.37x FY16’s revenue.

Risks

• Delay in new project launches.

Forecasts

• Unchanged.

Rating

HOLD ↔ TP: RM1.39 ↔

• Tambun is one of the strong beneficiaries of the rising land prices in Penang mainland but near-term outlook is clouded by the delay in new project launches, shrinking unbilled sales and subdued property sentiment.

Valuation

• Maintain HOLD with unchanged target price at RM1.39 ( based on unchanged discount of 40% to RNAV of RM2.33) given the near-term bleak outlook is clouded by lack of new project launches and shrinking unbilled sales despite the upside from current price is more than 10%.

Source: Hong Leong Investment Bank Research - 24 Aug 2017