• Maintain NEUTRAL, new TP of MYR1.03 from MYR0.90, 12% upside with c.7% FY23F yield. Tambun Indah’s 2Q23 results missed expectations, due to a provision for a foreseeable loss for a low-cost housing project. 1H23 property sales came up to MYR90.7m, which puts it on track to achieve management’s target of MYR150m for FY23. We expect earnings in the coming quarters to normalise, given its healthy property sales so far. We raise our TP to reflect the better market sentiment ahead, given the lifting of the political overhang post state elections.

• 2Q23 results review. Sequential revenue grew 7%, as a new project Dahlia Garden was launched during the quarter, while Pearl City transactions accounted for 95% of 2Q23 revenue. A provision of >MYR10m for a foreseeable loss for a low-cost housing project was incurred, and hence its bottomline was much weaker QoQ and YoY.

• Resilient sales in 2Q23. 2Q23 new property sales totalled MYR46.3m vs MYR44.5m in 1Q23. Dahlia Garden (GDV: MYR119m), which comprises 209 units of double-storey terraces and semi-detached houses (non strata/non-gated), was the major contributor. The project was recently launched, and the take-up rate has reached 24.2%. Other projects also saw better sales. These include Aster Villa (93.4% from 91.5% in 1Q23) and Ambay Garden (97.1% from 87.3%). Pearl Impiana is now 68.8%-sold, which is relatively unchanged from the previous quarter, as the company is waiting for the release of bumiputera lots.

• Another project to be launched in 4Q23. In view of the limited available products for sale, management is looking to roll out Botanic Villa worth a GDV of 292.4m in 4Q23. This strata landed project will feature 510 units of double-storey terrace, semi-detached houses and townhouses. This project, if launched on time, should help to lift full-year property sales.

• Forecasts. We cut our FY23 earnings forecast by 15% to account for the provision (for low-cost housing). We expect earnings in the coming quarters to be stronger, as the construction of the new project ie Dahlia Garden progresses further (currently in the early stage). Unbilled sales dropped slightly to MYR70.8m from MYR74.2m as at 1Q23.

• Valuations. Our TP is based on a lower 65% discount to RNAV (from 70%), and includes a parity ESG premium or discount, since TILB’s ESG score of 3 out of 4 is in line with the country median.

Source: RHB Securities Research - 29 Aug 2023