Tambun’s 9M18 core PATMI of RM42.5m (-37.1% YoY) was within expectations. Lower YoY results were caused by fewer on-going projects and lower new sales. Unbilled sales is now only at RM19.0m (cover ratio of 0.07x) and YTD sales figure of RM87m (-40.6% YoY) falling short of RM180m target. We cease coverage on Tambun Indah given the lack of catalyst in near-term amid prolonged recovery of the overall property market. Our last recommendation was HOLD with RNAV-derived TP of RM0.85

Within expectations. 9M18 revenue of RM136.5m translated into a core PATMI of RM42.5m (-37.1%), accounting for 80.2% and 79.7% of HLIB and consensus full year forecasts, respectively. Subsequent quarter may come in weaker considering the low unbilled sales and low new sales.

Dividend. Declared an interim dividend of 2 sen (3Q17: 3 sen) per share, going ex on 24 Jan 2019.

QoQ. 3Q18 revenue were flat (+0.2%) at RM48.2m while core PATMI improved by 6.6% to RM16.1m thanks to the lower effective tax rate (24.4% vs 32.1% in 2Q18)

YoY. Revenue contracted by 32.0% mainly caused by fewer on-going projects and lower new sales. In turn, core PATMI decreased by 32.7% in tandem with lower revenue base.

YTD. Core PATMI was down by 37.1%, in tandem with lower revenue (-38.2%), mainly due to fewer on-going projects and lower new sales as a result of the cautious approach taken by the company given the overall market condition.

Outlook. Future earnings will continue to be undermined by the low unbilled sales of only RM19.0m (cover ratio of 0.07x FY17 revenue) and slow YTD sales figure of RM87m (-40.6% YoY), which is falling behind full year target of RM180m. On a side note, we understand that the sport complex (investment properties) at Pearl City will be unveiled by 3Q19, which will house facilities such as futsal pitch, badminton courts, yoga room and etc.

Forecast. Unchanged as the Results Were in Line.

Cease Coverage. We cease coverage on Tambun Indah given the lack of catalyst in near-term amid prolonged recovery of overall property market. Despite the considerable dividend yield and healthy balance sheet, the earnings may continue to be undermined by the weak sales performance and low unbilled sales. Our last recommendation was HOLD with RNAV-derived TP of RM0.85 (based unchanged discount of 55% to RNAV of RM1.91).

Source: Hong Leong Investment Bank Research - 29 Nov 2018