We cut our TP to MYR2.00 (37.9% upside), in line with our recent sector downgrade to NEUTRAL. Maintain BUY. Although property sales will likely slow down further throughout the industry next year, we expect its mid-range housing segment to fare relatively better. The growth story at Batu Kawan is still appealing, and Tambun’s Raintree Park Phase 1 achieved 50% bookings during its prelaunch last weekend.
Sector downgrade. We have downgraded the property sector to NEUTRAL. We expect property transaction volumes to decline 3-5% in 2015 on the back of slower economic growth and a high loan rejection rate. We also anticipate property prices to stay flat as developers would have difficulty passing on incremental costs in an environment of weakening demand. Buyers/investors and developers are likely to adopt a wait-and-see stance in monitoring market conditions in 1H15, as the impact of goods and services tax (GST) kicks in. For the stocks under our coverage, we estimate new sales to drop by an average 10-20% YoY vs -25% YoY in 2014 and +41% YoY in 2013.
Affordable housing players should fare better. After numerous delays stemming from a slow approval process since early 2014, Tambun Indah Land (Tambun) finally obtained the final approval for its Raintree Park Phase 1 in Pearl City some weeks ago. The precinct, which has a GDV of MYR164m, will be ready for its official launch in Jan 2015. The soft launch over the last weekend was encouraging, as its booking rate reached 50%. Going into 2015, Tambun will launch about MYR600m worth of properties, mostly within Pearl City – comprising landed homes, shop lots and some apartments.
TP reduced to MYR2.00. Due to the challenging outlook for 2015, we bring down our TP to MYR2.00 (from MYR2.50), based on a larger 15% discount (from 0%) to RNAV. At the same time, we also lowered some of our GDV assumptions. The company’s fundamentals remain solid, with zero gearing, and should offer a sufficient buffer that would enable it to ride through a slowdown in the property market – since its products are mostly landed residential and commercial properties in the Pearl City township. A key risk that may derail our TP downgrade is stronger-than-expected economic growth.
Financial Exhibits
Financial Exhibits
SWOT Analysis
Company Profile
Tambun Indah Land is a developer based in the Penang mainland. Its flagship township – Pearl City – is located at Simpang Ampat, 15 minutes away from the Penang Second Bridge.
Recommendation Chart
Source: RHB
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Created by kiasutrader | Jun 14, 2016
Created by kiasutrader | May 05, 2016