Result

Earnings beat estimates. Tambun Indah Land (TIL) posted a net profit of RM7.9m for its 3Q21 results, tumbling 24.0% yoy and 47.7% qoq on the back of lower revenue, -20.8% yoy and -49.6% qoq. For 9M21, TIL recorded net profit of RM33.1m, surging 178.2% yoy, which accounts for 80/81% of our/consensus full year net profit estimates. The stronger-than-expected results were mainly due to higher recognition of progress billings during this quarter.

Comment

Weaker yoy and qoq. The lower yoy results were mainly weighed down by the lower new property sales and minimal site progress as Penang State underwent a full movement control order in Phase 1 of the National Recovery Plan (NRP) from 1st June 2021 until 7th July 2021. The Group’s offices and development sites were temporarily closed from 1st June 2021 and had resumed construction work in stages after 7 July 2021 under strict compliance of Standard Operating Procedures (SOP) in Phase 2 of NRP. Likewise, the weaker qoq results also due to the lower property sales and minimal site progress pursuant to the implementation of Phase 1 of NRP during 3Q21.

Slump in quarterly sales. TIL chalked up RM15.9m new sales during 3Q21, tumbling from RM99.5m sales achieved in 2Q21 and 3Q20’s RM58.8m. As of 9M21, the Group recorded RM147.5m property sales which constitute 82% of our RM180m news sales assumption for this year and exceed the Group’s initial sales target of RM130m set in early this year. In tandem with lower new sales, TIL’s unbilled sales also declined to RM89.1m from 2Q21’s RM105.7m. This renders earnings visibility to the Group for the next 2-3 years. Currently, the Group has seven ongoing projects with a total GDV of RM607.7m.

Future project launches. Under prevailing challenging operating atmosphere, 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 RM89.2m in the immediate future.

Earnings Outlook/Revision

We increase our 2021F net earnings estimate slightly by 5.4% to RM43.2m after revising upwards of our progress billings. Meanwhile, we keep our 2022F net profit forecast unchanged at RM45.1m.

Valuation & Recommendation

Downgrade to HOLD from BUY on TIL with an unchanged target price of RM0.75 as share price has reached our fair value. Our target price is 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.

Attractive dividend yield. Whilst we see limited upside for its current share price at this moment, shareholders could expect decent dividend yield of 5-6% for 2021- 2022F. This is assuming DPS of 4.0sen/4.2sen to be declared for 2021/2022 with minimum dividend payout of 40%. The Group will commit its dividend payments to reward long-term investors amid current economic uncertainty.

Source: JF Apex Securities Research - 26 Nov 2021