Result

• Earnings below expectations. Tambun Indah Land (TIL) recorded core net earnings of RM14.6m (excluding fair value gain on investment properties of RM0.8m) in its 4Q17 results, down 50.7% yoy and 38.9% qoq. Overall, full year 2017 core net profit of RM82.6m (-22.8% yoy) accounted for 91-92% of our full year earnings estimate and consensus with lower-than-expected progress billings and unexpected provision.

Comment

• Lower yoy and qoq. TIL recorded weaker yoy and qoq results on the back of lower topline, -26.0% yoy and - 14.8% qoq as there were few on-going projects and lower new sales. Also, the Group incurred a provision of RM4.0m for a low cost housing project during the quarter. For its full year 2017, TIL, again, posted a weaker result as core net profit slumped 22.8% yoy no thanks to decline in revenue, -21.8% yoy.

• Sluggish new sales. TIL continued to record lackluster new sales of RM30.2m in 4Q17, flat against RM32.0m achieved in 3Q17, and deteriorated from 2Q17 sales of RM47.9m and 1Q17 sales of RM36.2m. Overall, the Group chalked up new property sales of RM146.3m for the year 2017, tumbling 36.1% yoy from RM229.1m made in 2016.

• Unbilled sales slid further. In tandem with slump in new sales, TIL’s unbilled sales declined further to RM66.0m as of 4Q17 from RM95.0m in 3Q17. The Group’s unbilled sales now underpin its topline visibility for about 3 months or equivalent to 0.2x of its 2017 revenue.

• Fewer new launches for 2018. Moving forward, the Group aims to launch RM163.0m GDV of new projects in 2018 – Permai Residency@Kota Permai (GDV: RM53.0m) and Palm Garden@Pearl City (GDV: RM110.0m) amid subdued property outlook. In view of the challenging property outlook in Penang, the value of new property launches for 2018 are substantially lower than the initial plan of RM393m.

Earnings Outlook/Revision

• We slash our 2018F net earnings estimates by 9.6% to RM74.1m after lowering our new property sales assumptions to RM180m from RM200m previously as well as its progress billings. We also introduce our 2019F net profit forecast of RM70.7m based on new sales estimate of RM250m.

Valuation & Recommendation

• Maintain HOLD with a lower target price of RM0.94 (previous target price of 1.06) based on wider discount of 63% to its fully-diluted RNAV/share of RM2.53 in view of its dismal new sales and unbilled sales. Our revised target price also implies 5.5x 2018 FD PE.

• Limited downside risk backed by attractive dividend yield and distress valuation. While the Group’s earnings are currently affected by the sluggish sales, we see limited downside risk for the stock as the share price is well supported by its attractive dividend yield of c.8% and it is now trading at 5.2x 2018F FD PE.

Source: JF Apex Securities Research - 28 Feb 2018