Result

• Results above expectations. Tambun Indah Land (TIL) posted a net profit of RM15.1m in its 2Q21 results, soaring 1787.5% yoy and 49.5% qoq due to low base effect. 1H21 net profit of RM25.2m (+1580.0% yoy) accounts for 68- 69% of our and consensus’ full year 2021 net profit estimates. The stronger-than-expected results were mainly due to significantly higher recognition of progress billings.

Comment

• Stellar quarter. TIL posted stronger yoy results for 2Q21 mainly driven by higher revenue, +375.2% yoy and stronger margin (PBT margin surged 26.3ppts yoy). This was mainly attributable to higher new sales as well as the launch of a new project, Aster Villa (comprised of 162 units of double-storey terrace houses, 92 units of semi-detached houses and a unit of bungalow) during this quarter. Likewise, TIL recorded better 1H21 results thanks to higher progress billings and sales (top line soared 306.0% yoy) coupled with margin expansion (PBT margin rose 24.2ppts yoy) as we witnessed escalating costs pursuant to Covid19 lockdown in 1H20. Meanwhile, on qoq performance, the Group also registered better earnings on the back of higher revenue, +41.1% underpinned by higher property sales with a new project launch as mentioned above.
• Strong quarterly sales. TIL chalked up RM99.5m new sales during 2Q21, recovering from RM32.1m sales achieved in 1Q21 and 2Q20’s RM34.1m. As of 1H21, the Group recorded RM131.6m property sales which constitute 83% of our RM160m news sales assumption for this year. The Group is expected to continue benefiting from the House Ownership Campaign (HOC) 2020 scheme which was further extended till end 2021. In tandem with rising new sales, TIL’s unbilled sales also increased to RM105.7m from previous quarter of RM76.1m. This renders earnings visibility to the Group for the next 2-3 years. Currently, the Group has seven on-going projects with a total GDV of RM608.2m.
• Remaining project launch in 2H21. Under prevailing challenging operating atmosphere pursuant to rising Covid19 cases in Penang, the Group will continue to exercise prudence in new project launches, mainly focusing on affordable and mid-market landed residential projects. TIL aims to launch its Ambay Garden - a landed residential development comprising 178 units of double storey terrace houses and semi-detached houses in Pearl City, with a total GDV of RM93m in end of this year.

Earnings Outlook/Revision

• We lift our 2021F and 2022F net earnings estimates by respective 11.5% and 14.4% to RM41.0m and RM45.1m after raising our progress billings and sales assumption to RM180-190m.

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 now based at 7.2x 2022F PE multiple, which is at its 5-year mean PE and in line with other small and mid-cap property counters’ current valuations. Shareholders could expect decent dividend yield of 5-6% for 2021-2022F. This is assuming DPS of 3.8sen/4.2sen to be declared for 2021/2022 with minimum dividend payout of 40%. The Group will commit its dividend payments to reward longterm investors amid current economic uncertainty.

Source: JF Apex Securities Research - 27 Aug 2021