With our confidence on Tambun Indah Land (TILB) reinforced, we raise our  FY13  sales  forecast  to MYR500m.  We  believe  its  share  price  could see  an  upside  from  the  increase  in  news  flow  of  investments  into mainland Penang, eg a US-based medical devices manufacturer’s plans to  set  up  a  plant  at  Batu  Kawan  Industrial  Park  and  IJMLD’s  recent acquisition of 70 acres of land in Jawi. 
 
- Placement price set at MYR1.32. Last Friday, TILB fixed the issue price of  its  15m  placement  shares  at  MYR1.32.  This  represents  a  3.65% discount  to  the  five-day  VWAP,  up  to  and  including  18  July.  Proceeds from  the  placement  will  be  utilised  to  partly  fund  the  acquisition  of  a minority  stake  in  Pearl  City  from  Nadayu  Properties  (Not  Rated,  NPB MK). Our valuations reflect the impact from this corporate exercise.

- Raising  sales  forecast  to  MYR500m.  We  believe  TILB’s  annualised 1HFY13  property  sales  (1QFY13  sales:  MYR172.3m)  could  potentially surpass  our  earlier  forecast  of  MYR450m.  The  take-up  rate  of  recent launches, such as Straits Garden and Pearl Avenue shop lots, exceeded 70%. As at May 2013, its unbilled sales amounted to MYR500m. 

- Job  opportunities  underpin  demand  for  properties.  News  flows focusing  on  mainland  Penang  are  increasing.  Recently,  a  US  based medical devices manufacturer announced plans to set up a plant on 12-acres  at  Batu  Kawan  Industrial  Park.  The  facility,  which  will  create  700 jobs, will be completed by end-2014 and start production in 1QCY15.

- Penang  mainland  now  a  hot  area.  As  expected,  the  bigger  boys  are coming  into  the  mainland.  IJM  Land  (BUY,  IJMLD  MK,  FV:  MYR3.55) has further expanded its presence there by acquiring 70 acres of land in Jawi  at  a  land  cost  of  MYR18.50  per  sq  ft.  This  has  set  a  benchmark price for land in the surrounding areas. In our view, the value for TILB’s Pearl  City  should  be  higher, given  that  the area  is more  developed  and closer  to  the  Penang  Second  Bridge.  The  Group’s product prices and gross development value (GDV) will likely see more upside.

- Maintain  Buy.  TILB  remains  our  top  pick.  It  is  the  best  proxy  for mainland  Penang  property  theme,  that  is  well-supported  by  strong earnings fundamentals. Valuations are still undemanding at 6.7x FY14F P/E.  We  re-iterate  our  BUY  recommendation,  with  an  unchanged  fair value of MYR1.71, based on a 20% discount to RNAV. 

Source: RHB