• Upgrade to BUY from Neutral, unchanged TP of MYR1.20 offers 23% upside with c.5% FY25F yield. Tambun Indah’s 2Q24 results outperformed our estimate – due to its higher-than-expected property sales – but are in line with the consensus forecast. It also booked solid new property sales of MYR133m for 1H24, which indicates that it will be ahead of management’s guidance of MYR150m in property sales for the full year. Our recommendation upgrade is premised on its strong sales growth momentum, as well as the line-up of new projects to be launched in FY25.

• 2Q24 results review. 2Q24 revenue increased by 17% YoY (-11% QoQ) from higher property sales, mostly from its Botanic Villa project which was launched at the end of last year. PBT (-7% QoQ, +157% YoY) and core profit (-9% QoQ, +124% YoY) more than doubled from a lower base last year, when it incurred a provision for a foreseeable loss for a low-cost housing project. QoQ, revenue and earnings declined on lower new property sales of MYR44.5m vs MYR88.1m in new sales in 1Q24.

• Focus on existing projects. For FY24, TILB plans to continue focusing on the two sizeable projects launched last year – Botanic Villa (GDV: MYR303m) and Dahlia Garden (GDV: MYR122m), which have a take-up rate of 58% and 67% and accounted for 65% of total revenue in 1H24. Other ongoing projects include Mutiara Indah (GDV: MYR42m, take-up rate: 86%) and three other projects (Aster Villa, Ambay Garden, Pearl Impiana) with almost full take-up rates. The group’s unbilled sales amount to MYR126m (Dec 23: MYR123m).

• New launches pushed back to FY25. With the strong sales to date, management is postponing the launch of its freehold landed project in Bukit Mertajam (GDV: MYR52m) to next year. It is also planning to launch a project named Aralia Park, a 21-storey high-rise development with an estimated GDV of MYR148m next year.

• Forecasts. We raise our FY24-26 earnings estimates by 7%, 6%, and 5% after lifting our sales assumption, as well as incorporating TILB’s new property development projects into our forecasts. Our TP is premised on a 60% discount to RNAV. Key risks include: Lower-than-expected sales momentum, and delays in project launches.

Source: RHB Research - 30 Aug 2024