Tambun’s 1Q15 earnings rose 18.3% YoY. We maintain our BUY rating and lift our TP to MYR2.28 (29% upside) as we include the incremental value from the recently-acquired land in Bukit Mertajam. Despite the prevailing slow property market and the attrition from loan rejections, demand for properties in Pearl City remains strong, with Raintree Park 1 achieving a take-up rate of almost 70%.

• Within expectations. Tambun Indah Land’s (Tambun)1Q15 results were in line with our and market expectations. Key projects that underpinned earnings were Pearl Harmoni, Straits Garden and other phases within Pearl City. The contribution from Pearl City to total property development turnover, however, dropped to 54.5% from 59.8% in 4Q14 as the construction of projects outside Pearl City advanced further. Meanwhile, management announced a 6.7 sen final dividend for 4Q14, 46% higher than the 4.6 sen declared in 4Q13.
• MYR146.3m in new sales in 1Q. The company achieved new sales worth MYR146.3m in 1Q15, a substantial increase from MYR81m in 4Q14 and on track to meet our MYR400m forecast. The amount was largely contributed by Raintree Park 1 (MYR92m), Pearl Harmoni (MYR16m) and Pearl Avenue (MYR9m). We are still more positive on the Mainland Penang market as the catalytic investments in Batu Kawan are progressing well – such as the 20%-completion of the Design Village premium outlet and the launch of Aspen Vision City where the IKEAstore will be sited. Tambun launched Raintree Park 1 in 1Q15,which has achieved a take-up rate of almost 70%. Moving forward, Raintree Park 2 and Avenue Garden are in the pipeline and will also be rolled out.
• Avenue Garden, priced at c.MYR300 psf is a high-rise service apartment project. We expect demand to be encouraging as it is located next Forecast. We make no changes to our forecast. Unbilled sales inched up to MYR443.6m in 1Q15 from MYR427.4m in 4Q14.
• Maintain BUY, with a new TP of MYR2.28. Based on an unchanged 15% discount to RNAV, we raise our TP to MYR2.28 (from MYR2.25), after incorporating the incremental value from the company’s new 18.8-acre land in Bukit Mertajam. Maintain BUY.