Result

• Within expectations. Tambun Indah Land (TIL) posted a net profit of RM15.1m for its 1Q22 results, soaring 49.5% yoy but tumbling 47.0% qoq. Similarly, the Group’s revenue was up 12.2% yoy but slid 50.4% qoq. Overall, 1Q22 net earnings are within expectations, accounting for 26%/28% of our/consensus full year net profit estimates.

Comment

• Stronger yoy but weaker qoq. The better yoy results were mainly due to the higher progressive revenue recognitions from the on-going projects, which included the newly launched projects, namely Aster Villa and Ambay Garden. On the other hand, the lower qoq results were mainly due to lower new property sales of RM14.8m (vs RM150.5m in 4Q21) as the Home Ownership Campaign 2021 (HOC 2021) initiative was ended in end of Dec 21. Margin wise, the Group achieved a commendable operating profit margin of 39.8% during this quarter (+8.6ppt yoy and +3.9ppt qoq) amid rising raw material cost and shortage of labour.

• Earnings backed by healthy unbilled sales. TIL chalked up RM14.8m new sales during 1Q22, slumping from RM150.5m sales achieved in 4Q21 and 1Q21’s RM32.1m. Still, we expect TIL to record stronger sales in coming quarters to reach our full year 2022 new sales assumption of RM200m (vs 2021: RM297.9m new property sales). In tandem with lower new sales achieved, the Group’s unbilled sales also slid further to RM93.6m from 4Q21’s RM131m. However, we still deem the unbilled sales are in healthy level which underpin its earnings visibility for the next 2-3 years. Meanwhile, the Group had eight on-going projects with a total GDV of RM703.8m as of 1Q22.

• Selective launches amid challenging outlook. With the rising interest rate atmosphere and escalating construction costs, 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 Pearl Impiana - a landed residential development comprising 148 units of double storey terrace houses and semi-detached houses in Pearl City, with a total GDV of RM78.7m in the immediate future.

Earnings Outlook/Revision

• No change to our 2022F and 2023F net profit forecasts of RM57.6m and RM68.7m respectively.

Valuation & Recommendation

• Maintain BUY on TIL with a higher target price of RM1.10 (from RM0.93). Our revised target price is now pegged at higher PE multiple of 8.3x 2022F EPS of 13 sen (from 7x PE), which is at its +1 SD above 5-year mean PE and also in line with other small and mid-cap property counters’ current valuations.

• Decent dividend yield and sturdy balance sheet. Shareholders could expect decent dividend yield of 5-6% for 2021-2022F. This is assuming DPS of 5.9sen/5.5sen 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. Additionally, the Group boasts of sturdy balance sheet with a net cash position.

Source: JF Apex Securities Research - 27 May 2022