INVESTMENT MERIT

- 1Q13 results in line. Tambun Indah reported a net profit of RM11.7m in 1Q13, up by 28.0% YoY against the previous corresponding quarter, and making up 23% and 24% of ours as well as the street’s full-year estimates. The revenue recorded in 1Q13 was RM78.3m, which increased by 18.7% YoY against the previous corresponding quarter. Revenue for the quarter was contributed mainly by Pearl City projects, which accounted for 66% (or RM51.7m) of the total revenue in 1Q13 as opposed to 59% in FY12. We understand that the group’s Pearl City projects have a GDV of RM3.0b, with a remaining GDV of c. RM2.0b which will be launched in phases until 2020. In addition, the Straits Garden project in Penang also contributed to the 1Q13 revenue growth. 

- Near term prospect remains intact. Tambun Indah’s near term prospects remains intact as it recorded a take-up rate of 70.9% as at end-March for its ongoing projects worth RM1.23b in GDV. Current unbilled sales stand at RM425m, which is 1.4x its FY12 revenue of RM297m, thus providing 2-3 years of earnings visibility.

- Profit-taking on property stocks post the recent run-up. Stock prices of property companies with Penang Mainland exposure such as Tambun Indah, Global Oriental and Wing Tai  have hit a pause recently. We believe the key reason for the pullback is profittaking by investors on property stocks amid the KLPRP Index soaring by as high as 18.7% in less than one month  after the election, which has since retraced to 8.4%. The tragic collapse of a section of the under-construction Second Penang Bridge bridge could have contributed to some negative sentiments. However, the impact should be minimal as its construction is still ahead of schedule and prospects for the Penang mainland property market remain just as promising. 

- Impressive stock performance warrants an exit.  We opine that the time is now right to realise gains on TAMBUN as the stock has surged by 35.4% to RM1.32 since our last buy recommendation in April @ RM0.975, exceeding our target price of RM1.10. For the year to date period, the stock has increased handsomely by 74.8%. Based on its current share price, the stock is trading at 8.0x FY13E PER, which is in line with its small to mid-cap peers that are trading at 6.0–9.0x PER. Should the stock price retrace to  a favourable level, we will revisit it in due course. 

SWOT ANALYSIS

- Strength: Established developer with a visible pipeline and strong balance sheet.

- Weaknesses: Lack of diversification in terms of geographical area.

- Opportunities:  Vibrant property market in Penang and spillover effects from foreign investment inflow.

- Threats: Competition and slowdown in demand.

TECHNICALS

- Resistance: RM1.40 (R1), RM1.57 (R2)

- Support: RM1.27 (S1), RM1.00 (S2)

- Comments: TAMBUN’s share price appears stuck in a sideways consolidation phase. While the technical indicators have yet to show worrying signs, the share price would need to break out above RM1.40 very soon to mark an uptrend resumption towards RM1.70. Failing which, a bearish “Triple Top” pattern could take precedence and TAMBUN could potentially retreat towards the RM1.00 support.

Source: Kenanga