• Downgrade to NEUTRAL from Buy, unchanged MYR0.90 TP implies 4% upside, with c.8% FY24F yield. Tambun Indah’s 1Q23 results missed expectations. Its quarterly property sales totalled MYR44.5m, in line with management’s target of MYR150m for FY23. We expect earnings in the coming quarters to be slightly stronger, since Dahlia Garden will be launched next month. We downgrade our stock rating to NEUTRAL, however, given the lesser upside from its current share price.

• 1Q23 results. TILB’s revenue fell QoQ and YoY as progress billings were lower from: i) Ongoing projects, which were nearing the completion stage, as well as ii) it having fewer ongoing projects compared to the previous year. Its EBIT margin remained relatively stable, at around 33%. Overall, Pearl City accounted for 94.9% of total revenue in 1Q23.

• Decent sales in 1Q23. New property sales came up to MYR44.5m, from MYR40m in 4Q22. The sales growth was largely driven by two projects: Aster Villa (91.5% sold, from 77.6% in 4Q22) and Ambay Garden (87.3% sold, from 74.3% in 4Q22). Meanwhile, the take-up rate for Pearl Impiana stayed relatively unchanged at 68%, as the company is applying for the release of bumiputera lots. All other previously launched projects such as Ambay Park and Aster Villa were already almost fully sold.

• Pipeline launches. Management plans to roll out Dahlia Garden in Pearl City next month. With a GDV of MYR107m, the project comprises 209 units of double-storey terraced and semi-detached homes (non-strata/non- gated). Depending on market conditions, TILB may also launch another phase in Pearl City towards the year-end.

• Forecasts. We fine-tune FY23-25F earnings, and we expect earnings in the coming quarters to be better, given the timing of the company’s launches. Unbilled sales for 1Q23 fell slightly to MYR74.2m vs MYR77.1m as at 4Q22.

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

• ESG framework update. As there is now greater focus on the E pillar due to critical climate change issues, we have tweaked our ESG weightage. Henceforth, we assign a weightage of 50% to the E pillar, followed by 25% each to the S and G pillars. Further details are in our 2 May thematic research note titled Envisioning a Better Future.

Source: RHB Research - 26 May 2023