Highlights

• We understand that Tambun Indah has secured advertising permits and developer licenses (APDL) for Raint ree Park2 and Avenue Garden in early Dec 15 after delays of more than half a year.

• Both projects have total GDV of RM300m and have started piling works while waiting for approvals. Given the affordable price range, we gather the booking rate for Raintree Park 2 (<RM500k) and Avenue Garden has achieved more than 50%.

• Avenue Garden is a 17-storey service apartment with 312 residential units. The pricing is attractive at RM300 psf with smaller size units cost about RM230k. Avenue Garden is just located near to GEMS International School.

• To recap, new property sales in 3QFY15 fell 13% QoQ to RM22m, bringing 9M15 sales to RM193m, only accounting for 48% of company’s initial full year sales target of RM400m. This was mainly due to lack of new projects launches with Raintree Park2 and Avenue Garden waiting for APDL.

• With both projects managed to secure APDL, we expect new sales in FY16 to grow strongly to RM420m.

• Average take up rate from on-going projects is healthy and above 90%. Unbilled sales stood at RM343m in 3QFY15, representing 0.8x of the group’s FY14 total revenue.

Risks

• Another delay on new project launches;
• Concentration on Penang.

Forecasts

• Unchanged as we already factored in the timing of securing APDL.

Rating

HOLD

Positives

• (1) Strong beneficiary of rising land prices in Penang mainland; (2) Pearl City Flagship will provide the main earnings driver; (3) Potential for more RNAV-accretive landbanking exercises.

Negatives

• (1) High project concentration in Penang; (2) Delay in new project launches.

Valuation

Maintain HOLD on the stock with target price maintained at RM1.39 based on unchanged discount of 40% to RNAV with dividend yield of 5.7%.

Source: Hong Leong Investment Bank Research - 18 Dec 2015