Result

• Result is in line with expectations. Tambun Indah Land (TIL) recorded a core net profit of RM10.9m in its 3Q19 results, tumbling 32.3% yoy and 6.0% qoq. Overall, the Group achieved 9M19 net earnings of RM32.6m, down 23.5% yoy, accounting for 74%/75% of ours/street’s full year net earnings estimates.

Comment

• Weaker yoy……. TIL registered a lower bottom line in the quarter on the back of lower topline, -31.3% yoy mainly due to fewer on-going projects, with the Group adopting a cautious approach for new property launches given the current challenging market condition. Furthermore, the unfavourable product mix as a result of selling high proportion of affordable houses as well as higher interest expense in relation to the drawdown of a term loan during 3Q19 for the newly acquired land at Simpang Ampat, Penang, also weighed on the Group’s bottom line as PBT margin slid 3.4ppts yoy. Likewise, the abovementioned reasons dragged down the Group’s 9M19 performance with top line and bottom line falling 20.5% yoy and 23.5% respectively.

• ……….and qoq. Similarly, TIL registered a lower qoq result no thanks to timing of work progress in the on-going development projects as the projects launched during 3Q19 were at their early stages of construction, which resulted in revenue declining 17.5% qoq. Also, the lower PBT, -11.2% qoq, was attributed to the higher interest expense as mentioned earlier.

• New launches lifted 3Q19 sales. TIL chalked up impressive 3Q19 new sales of RM49.8m, which surged 47.8% yoy against RM33.7m recorded in 3Q18 and soared 35.0% qoq from RM36.9m made in 2Q19, underpinned by two new projects namely, Palm Garden (a high rise serviced apartment) and Begonia Villa (a gated and guarded residential project), both located at Pearl City, Simpang Ampat. Overall, new sales achieved for 9M19 worth RM118.7m (vs RM87.0m in 9M18) are ahead our expectation, accounting for 79% of our full year sales target of RM150m. In tandem with rising new sales, TIL’s unbilled sales also increased further to RM33.4m in this quarter from RM17.6m recorded in the preceding quarter, which provides earnings visibility to the Group for the next 2-3 years.

Source: JF Apex Securities Research - 27 Nov 2019