TILB’s  briefing  was  very  well  attended  yesterday.  On  the  back  of MYR600m  in  new  projects  to  be  launched  this  year, management’s MYR500m  sales  target  can  easily  be  achieved  given  YTD  bookings  of MYR140m.  We  are,  therefore,  confident  with  our  earnings  forecast.  In anticipation  of  more  news  flow  on  Batu  Kawan,  we  maintain  our positive view on TILB. Maintain BUY with an unchanged MYR2.20 FV.

MYR500m  sales  an  easy  target.  Management’s  expectation  of MYR500m  new  sales  for  this  year  appears  an  easy  target  to  hit considering  Tambun Indah Land (TILB)’s  YTD  sales/bookings  of  more than  MYR130m.  On  an  annualised  basis,  full-year  sales  could  surpass the  MYR500m  mark.  Most  of  the  projects  it  launched  in  4Q13-1Q14 achieved  reasonably  good  take-up/booking  rate,  such  as  70%  for Camellia  Park,  50%  for  Taman  Bukit  Residence  and  40%  for  Pearl Harmoni.

Pricing  trend  supporting  strong  margin.  Based  on  the  historical pricing  trend,  the terrace homes in TILB’s flagship Pearl City  township have seen a consistent 10% increase in ASP annually over the past six years  while  semi-detached  homes  and  bungalows  had  about  5-10% increase on average. This is a good indication of demand for affordable housing. We believe the house pricing in Seberang Perai Selatan (SPS) will continue to hold up, given the higher entry cost (ie land cost) by other developers.  This  gives  TILB  plenty  of  room  to  raise  its  ASP  going forward.  Compared  to  the  current  market  price  of  about  MYR35-40  psf for land in SPS and MYR45-55 psf in Batu Kawan, TILB’s average land cost of MYR16-18 psf will mean a much stronger margin for its property developments compared to the newcomers.  

Expanding  pool  of  buyers.  Management  is  targeting  to  have  40%  of buyers  from  Penang  Island  this  year.  Already,  the  latter  accounted  for 37% of  the  total  number  of  buyers  in  Pearl  City  in  2013  vs  only 28%  in 2009.  Interestingly,  there  are also  an  increasing  number of buyers  from outside Penang  – Kedah, Northern Perak and Kuala Lumpur – and this could largely be due to rising job opportunities in the state.   

Maintain BUY. SPS has become the focal point following the opening of the Penang Second Bridge and the announcement of IKEA’s investment in Batu Kawan. We believe good news will continue to flow in the coming months. We maintain our BUY rating and MYR2.20 FV on TILB.

Financial Exhibits

SWOT Analysis

Company Profile

Tambun Indah Land (TILB) is a developer based in Mainland Penang. Its flagship Pearl City township is located at Simpang Empat, 15 minutes away from the Penang Second Bridge.

Recommendation Chart

Source: RHB