Tambun  has  terminated  the  deal  to  acquire  209.5  acres  of  land,  as certain terms were not met.  Although this could disappoint the market, we still like Tambun for its solid management team and >500-acre land at  Seberang  Perai.  Moving  forward,  management  can  still  embark  on other  landbanking  opportunities.  For  now,  without  the  new  land,  we lower our TP to MYR2.50 (14.7% upside). Maintain BUY.

The deal is off.  Tambun Indah  Land  (Tambun)  has terminated the deal to acquire 209.5 acres of land from TPPT Sdn Bhd. The land, which is adjacent to the southern side of Tambun’s Pearl City, costs MYR150m(MYR16.50  psf).  As  certain  conditions  cannot  be  met,  and  given  that expensive  charges  could  be  incurred  if  the  period  is  extended, management has decided to call off the deal. The MYR15m deposit paid earlier will be refunded.

Other  opportunities  still  aplenty.  While  the  market  could  be disappointed with the news, we think Tambun’s solid management team and  its  over  500  acres  of  landbank  in  Seberang  Perai  are  still  the company’s  key  selling  points.  Management’s  execution  track  record  is proven  and the strategically-located  Pearl City is still the key  township  in Seberang  Perai  Selatan  to  capture  the  rising  housing  demand  there. Meanwhile,  we  also  do  not  rule  out  the  possibility  that  the  deal  could happen again, given that only Tambun has access to the land. Moving ahead, the company can still embark on other landbanking opportunities which should be RNAV-accretive.

3Q14  earnings  likely  on  track.  Tambun  is  scheduled  to  release  its 3Q14 results in two weeks’ time. Underpinned by the MYR493m unbilled sales, earnings should be largely on track to reach our full-year forecast. In view of better earnings this year, we also expect the interim dividend to  be  higher  than  2  sen  declared  last  year.  New  sales,  however,  will likely  be  slightly  weaker  due  to  the  lack  of  new  launches  during  the quarter.

Maintain  BUY.  Our forecasts are unchanged as the land is not planned to  be  developed  over  the  next  2-3  years.  Nevertheless,  we  expect  the latest news to bring some weakness to share price, but we continue to like Tambun as an affordable housing player. For now, without the new land, our  TP  is lowered to MYR2.50 (from MYR3.00). We maintain our BUY rating.

Source: RHB