• Maintain NEUTRAL and MYR0.90 TP, 6% upside with c.7% yield. Tambun Indah’s 2Q22 results are in line. Given the limited number of ongoing projects, the impact of the labour shortage issue is not so apparent for the developer. Its 2Q22 earnings were also partly boosted by some cost adjustments arising from a few recently completed projects. 1H property sales amounted to MYR44.3m, and management is still targeting to achieve MYR130m sales by year-end.

• 2Q22 results. QoQ revenue growth was relatively flat, but the EBIT margin expanded to 42% (1Q22: 40%), due to the better performance against budgeted costs for two recently completed projects (Begonia Villa and Mutiara Indah). However, on a YoY basis, the drop in revenue was largely due to lower property sales compared to 1Q21, but cost adjustments lifted earnings during the quarter.

• Better property sales in 2Q22. New property sales were at MYR29.5m, marking an improvement from MYR14.8m in 1Q22. The better sales were very much in line with the industry trend, as 1Q22 sales cooled down after the expiry of the Home Ownership Campaign in December last year, while 2Q22 saw the boost arising from the Employees Provident Fund withdrawal scheme. Take-up rates for most ongoing projects improved QoQ. Ambay Garden, Palm Garden and Aster Villa are now 74%-, 73%- and 59%-sold, vs 70%, 61% and 53% in the previous quarter. The company will focus on selling the remaining unsold units, which are worth around MYR127m in GDV in 2H22.

• Expect Pearl Impiana to be well-received. Management still aims to record MYR130m in sales by year-end. In 3Q, the company has already rolled out Pearl Impiana (GDV: MYR78.7m), a non-gated project comprising double-storey terraces and semi-detached homes in Pearl City. As this is a non-gated project, we believe this development phase will likely be well- received by potential buyers.

• Forecasts. We make no changes to our earnings forecasts. Unbilled sales fell to MYR68.5m, from MYR93.6m in 1Q22.

• Valuations. Our TP is based on an unchanged 70% discount to RNAV, and includes a 0% ESG premium or discount – this is because Tambun’s ESG score of 3.0 is in line with the country median.

Source: RHB Research - 26 Aug 2022