Results

• Overall Decline. Tambun Indah Land (TIL) posted its 1Q23 results with a lower revenue of RM47.5m (-11.9% QoQ, -10.9% YoY) and a lower net profit at RM10.8m (-10.7% QoQ, -28.5% YoY) dragged by the lower revenue recognitions from projects that are close to completion and low number of new project launches.

• Margins took a hit. Overall margins also experienced another decline with EBIT at RM15.8m (-13.7% QoQ, -25.5% YoY), dragging both PBT and NP margins down to RM14.8m ( -14.0% QoQ, -27.5% YoY) and RM10.8m ( -10.7% QoQ, -28.5% YoY) respectively due to overall lower revenue and unfavourable product mix that contributed lower margins. We expect margins to continue being affected throughout the year.

Comment

• Unbilled Sales decline further. The Group’s unbilled sales slid to RM74.2m in 1Q23 from RM77.1m in the previous quarter and total new property sales for the quarter are at RM44.4m which is higher than its preceding quarter and year which is also on par with our expectations of RM150m new property sales for FY23.

• Net Cash position. Tambun is currently in a net cash position since FY21, holding a total cash and bank balance amount of RM204.3m which is also 53.8% of its total market cap.

• Holding back launches. Tambun has only one project planned for launch, Dahlia Garden with a GDV of RM107m. The Group remains conservative with its upcoming project and we expect more projects to be announced in 2H23.

Earnings Outlook/Revision

• We reduce our 2024F revenue and net earnings estimates by 8.0% and 22.1% to RM221.7m and RM55.5m respectively after adjusting our assumptions on lesser project launches.

Valuation & Recommendation

• Maintain HOLD with a target price of RM0.88. Our target price is pegged at a PE multiple of 7.0x (previously 5.7x PE) to the 2024F EPS, which is at -1 STD to its 5-year mean PE and is also lower than the property index PE of 15.4x as we anticipat

Source: JF Apex Securities Research - 26 May 2023