Result

• Results above expectations. Tambun Indah Land (TIL) posted a net profit of RM10.1m in its 1Q21 results, soaring 1162.5% yoy but tumbled 25.7% qoq. This accounts for 30%/33% of our/consensus’ full year 2021 net profit estimates. The stronger-than-expected results were mainly due to significantly higher recognition of progress billings.

Comment

• Stronger yoy but weaker qoq. TIL posted better yoy results for 1Q21 mainly driven by higher revenue, +236.9% yoy and stronger margin (PBT margin: +22.2pts). This was mainly attributable to higher new sales during this quarter as compared to 1Q20 coupled with higher construction progress (construction works at project sites were temporarily closed from mid of March 20 due to MCO 1.0). However, on qoq performance, the Group recorded lackluster earnings on the back of lower revenue, -22.4% no thanks to lower new sales achieved against 4Q20.

• Steady sales. TIL chalked up RM32.1m new sales during 1Q21, declining from RM66.3m sales achieved in 4Q20 but significantly higher than 1Q20’s RM9.1m, which was the onset of Covid-19 pandemic and nationwide lockdown. We expect the Group to achieve RM160-170m news sales for this year 2021 which is on par with its last year sales performance of RM168m. The Group will continue to benefit from the House Ownership Campaign (HOC) 2020 scheme which lasts till mid-2021. On the other hand, TIL’s unbilled sales decreased to RM76.1m as of 1Q21 from RM92.9m in 4Q20. Nevertheless, this renders earnings visibility to the Group for the next 2-3 years. Currently, the Group has six on-going projects with a total GDV of RM453.8m (average take-up rate of 60.5%).

• Planned launches in 2021. Amid prevailing spike in Covid-19 cases and MCO 3.0, the Group will continue to exercise prudence in new project launches, focusing on affordable and mid-market landed residential projects. TIL targets to launch a total GDV of RM244m worth of housing projects this year. These are: 1) Aster Villa – a gated and guarded residential development comprising 255 units of double storey terrace houses, semi-detached houses and bungalow in Pearl City, and 2) Ambay Garden - a landed residential development comprising 178 units of double storey terrace houses and semi-detached houses in Pearl City.

Earnings Outlook/Revision

• We lift our 2021F and 2022F net earnings estimates by respective 7.6% and 10.4% to RM36.8m and RM39.4m after raising our progress billings.

Valuation & Recommendation

• Maintain BUY on TIL with an unchanged target price of RM0.75 as we believe worst is over for TIL and sales continue to improve. Our valuation is based at 9x 2021F PE multiple, which is in line with other large and mid-cap property counters’ current valuations. Shareholders could expect decent dividend yield of 3-4% for 2021F. This is assuming DPS of 3.4sen to be declared for 2021 with minimum dividend payout of 40%. We believe the Group will commit its dividend payments to reward long-term investors amid current economic uncertainty.

Source: JF Apex Securities Research - 28 May 2021