Result

• No surprises. Tambun Indah Land (TIL) recorded a core net profit of RM11.0m in its 4Q18 results (excluding RM1.9m fair value gain on investment properties), tumbling 30.4% yoy and 31.7% qoq. Overall, the Group chalked up a core net profit of RM53.6m (-33.6% yoy) in 2018 which accounts for 98-99% of our full year net earnings estimate and consensus.

Comment

• Weaker yoy and qoq results. TIL registered a weaker bottom line yoy and qoq in 4Q18 mainly due to lower topline (-28.9% yoy, -11.0% qoq) pursuant to fewer on going projects and sales. Meanwhile, new projects launched, namely Palma Residensi in Bukit Mertajam and Mutiara Indah in Simpang Ampat during this quarter are still in early stages of construction and yet to contribute significantly to the Group. Likewise, TIL posted a lower full year 2018 result due to weaker revenue achieved, -38.4% yoy amid lower sales and progress billings. 2018 topline was mainly underpinned by projects such as Raintree Park 2 and Pearl Saujana Permai in Pearl City township, contributing 55% of the Group’s revenue.

• New sales surged during 4Q18 but failed to lift full year figure. TIL’s new sales for this quarter improved 38.9% qoq to RM46.8m from RM33.7m in 3Q18. Similarly, on yoy comparison, 4Q18 new sales soared by 55.0% against RM30.2m recorded in 4Q17. Still, TIL’s 2018 new sales of RM133.8m was down by 8.5% from 2017’s RM146.3m. In a nutshell, new sales achieved for this year successfully exceeded our full year sales target of RM120m by 11.7%. On the other hand, TIL’s unbilled sales increased 23.2% to RM23.4m as of 4Q18 from RM19.0m in 3Q18 on the back of strong sales during this quarter. Having said that, current unbilled sales merely underpin the Group’s topline visibility of less than 2 months, i.e. 0.13x of 2018’s revenue.

• Expecting final dividend of 3.0 sen/share to be declared. The Group has paid a first interim dividend of 2.0 sen/share recently. Based on dividend payout ratio of 40%, we envisage TIL to declare a final dividend of 3.0 sen/share which brings the full year dividend to 5.0 sen/share. This also translates into an attractive dividend yield of 6.4%.

• Targeting more launches in 2019. For 2019, TIL targets more new launches with projects’ GDVs totaling RM243.0m. These new projects are: 1) Palm Garden@Pearl

City (comprising 335 units of 18-storey serviced apartment) with GDV of RM105.7m, 2) Begonia Villa@Pearl City with GDV of RM84.3m and 3) Permai Residency@Kota Permai with GDV of RM53.0m.

Earnings Outlook/Revision

• We slash our core net earnings forecast for 2019F by 7.3% to RM49.8m (-7.1% yoy) after revising our progress billings. Also, we introduce our 2020F net earnings forecast of RM50.7m (+1.9% yoy). Our new sales assumptions for 2019F and 2020F are RM150m and RM200m respectively.

Valuation & Recommendation

• Maintain BUY on TIL with an unchanged target price of RM0.96 as we believe worst is over for the Group and new sales could improve modestly moving forward. Also, the stock is well supported by its decent dividend yield of slightly over 6% for 2019-2020F (dividend payout of at least 40%). Our target price of RM0.96 is based on a 56% discount to its RNAV/share of RM2.19, also implying 8.4x of its 2019 PE. We believe market has fully discounted its sloppy earnings and the Group’s new sales have started to improve gradually.

Source: JF Apex Securities Research - 25 Feb 2019