Tambun’s 3Q14  results  were  within  expectations.  Maintain  BUY  with  a MYR2.50  TP  (18.5%  upside).  Due  to  a  lack  of  new  launches  in  3Q, new sales fell to MYR74m, from MYR149m in 2Q. We expect Tambun to end the  year  with  MYR430m  in  sales  (vs  MYR500m  in  FY13).  Although  the recent  land  deal  was  called  off,  we  remain  confident  of  management’s ability and expect some new land parcels to be secured next year.   

Within  expectations.  Tambun Indah’s  (Tambun)  3Q14  results  came  in within our and market expectations. While topline fell 8.7% QoQ due to a lack  of  new  product  launches  as  a  result  of  delays  in  the  approval process, net earnings were flat due to the absence of provision made for supplemental  development  costs  on  low-cost  housing  projects  in  2Q14 (amounted  to  MYR29.6m).  Meanwhile,  Pearl  City  remained  the  key contributor,  making  up  67.8%  of  total  property  development  turnover  in 3Q14  (vs  73%  in  2Q14).  The  average  take-up  rate  for  the  township reached 86.9%. A 3 sen single-tier interim dividend was declared during the quarter, which is higher than the payout of 2 sen last year.

New  sales  fell  in  3Q.  New  sales  in  3Q  fell  to  MYR74.1m  from MYR149m  in  2Q,  bringing  9M  total  new  sales  to  MYR348.1m.  The slower  sales  were  mainly  due  to  a  lack  of  new  launches  in  3Q,  as approvals for some projects are still pending.  The key contributors were Pearl Harmoni (MYR102m), Pearl Residence (MYR53m), Camellia Park (MYR38.7m),  and  Bukit  Residence  (MYR46.3m).  We  estimate  that Tambun  will  likely  end  the  year  with  MYR430m  sales  (vs  MYR500m  in FY13), largely in line with our forecast. Thus far, Pearl Avenue 2, with a GDV  of  MYR45m,  has  been  launched  in  4Q.  The  commercial  shops have achieved a take-up rate of 70%.

Forecasts.  We  make  no  changes  to  our  earnings  forecasts.  Unbilled sales declined slightly to MYR457.3m from MYR493m in 2Q.  

Maintain BUY. Although the company has recently terminated a deal to buy  210  acres  of  land  and  hence  lost  RNAV  enhancement,  given management’s  strength  and  track  record,  we  believe  Tambun  can embark  on  other  landbanking  opportunities.  The  investment  angle  for Penang  mainland  remains  encouraging,  which  should  translate  into  a meaningful  double-digit  earnings  growth  over  the  next  two  years  for Tambun due to rising housing demand. We maintain our BUY rating and 
MYR2.50 TP, implying an 18.5% upside.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Tambun Indah Land Bhd is a developer based in Penang mainland. Its flagship township Pearl City is located at Simpang Ampat,  15-minute away from the PSB.

Recommendation Chart

Source: RHB