Result

• Within expectations. Tambun Indah Land (TIL) posted a net profit of RM16.6m for its 2Q22 results, rising 9.7% yoy and 9.7% qoq. Meanwhile, the Group’s revenue dropped 18.4% yoy but climbed 2.6% qoq. Overall, 1H22 net earnings are within expectations, accounting for 55%/58% of our/consensus full year net profit estimates.

Comment

• Weaker yoy but stronger qoq. The weaker yoy results were mainly due to the absence of the Home Ownership Campaign 2021 (HOC 2021) initiative which ended in end-Dec 21.On the other hand, the lower qoq results were better mainly due to higher new property sales of 66 units worth RM29.5m against 37 units worth RM14.8m in 1Q22.

• Improved margin. Margin wise, the Group achieved an improved operating profit margin of 42.1% during this quarter (+11.8ppt yoy and +2.4ppt qoq) as it managed to lower cost of sales to 49% of revenue from 51.7% in 1Q22 and 63% in 2Q21.

• Earnings backed by healthy unbilled sales. Following 2Q22’s rebound in property sales, we reckon the worst is over and expect TIL to record stronger sales in coming quarters to reach our full year 2022 new sales assumption of RM200m (vs 2021: RM297.9m new property sales). The Group’s unbilled sales also slid further to RM68.5m from 1Q22’s RM93.6m. However, we still deem the unbilled sales are in healthy level which underpins its earnings visibility for the next 2-3 years. Meanwhile, the Group had six on-going projects with a total GDV of RM604.6m as of 2Q22.

• Selective launches amid challenging outlook. With the rising interest rate atmosphere and escalating construction costs, the Group will continue to exercise prudence in new project launches, mainly focusing on affordable and mid-market landed residential projects. TIL aims to launch its Pearl Impiana - a landed residential development comprising 148 units of double storey terrace houses and semi-detached houses in Pearl City, with a total GDV of RM78.7m in the immediate future.

Earnings Outlook/Revision

• No change to our 2022F and 2023F net profit forecasts of RM57.6m and RM68.7m respectively.

Valuation & Recommendation

• Maintain BUY on TIL with an unchanged target price of RM1.10. Our target price is pegged at PE multiple of 8.3x 2022F EPS of 13 sen, which is at its +1 SD above 5-year mean PE and also in line with other small and mid-cap property counters’ current valuations.

• Decent dividend yield and sturdy balance sheet. Shareholders could expect decent dividend yield of 5-6% for 2022F. This is assuming DPS of 5.9 sen for the full year of 2022 with minimum dividend payout of 40%. The Group will commit its dividend payments to reward long-term investors amid current economic uncertainty. Additionally, the Group boasts of sturdy balance sheet with a net cash position.

Source: JF Apex Securities Research - 26 Aug 2022