Tambun Indah Land’s first-half earnings within expectations

Tambun Indah Land Bhd (Aug 12, RM1.53)

Maintain buy with a target price of RM1.64: Tambun Indah Land Bhd recorded second quarter ended June 30, 2016 (2QFY16) net earnings of RM28.6 million on the back of higher revenue of RM104.3 million. The group’s first half ended June 30, 2016 (1HFY16) bottom line of RM52.2 million accounted for 54% and 51% of market and our full-year net earnings forecasts respectively.

The stronger 2QFY16 net earnings and revenue were underpinned by increase in progress billings, higher percentage of project completions and better take-up rates for ongoing property projects especially in Pearl City. Furthermore, the group also chalked up impressive pre-tax profit margin of 43.5% in 2QFY16, attributable to higher operating margin as a result of favourable product mix and proportionately lower financing cost. Similarly, the group’s 1HFY16 net earnings were lifted by higher margins amid flattish revenue growth.

Its Pearl City Mall started to contribute in 2QFY16 to its rental income under investment properties. This was in addition to its GEMS International School, which commenced in 2HFY15. However, the earnings contribution from the property investment was insignificant to the group with our estimation of yearly profit of RM4 million.

Tambun Indah successfully obtained the advertising permits and developer licences for Pearl Saujana and Pearl 28 in May this year and its official launch will be on schedule in 2HFY16. This helped allay the concern over sustainability of project launches. For 2QFY16, the group registered new sales of RM62.7 million, hence bringing 1HFY16 sales to RM178.4 million. Thus, we believe the group shall achieve its target new sales of RM300 million with current sales accounting for 59% of full-year target but fall short of our new sales assumption of RM400 million. Its unbilled sales declined to RM311.1 million as of 2QFY16 from RM354.4 million in 1QFY16. — JF Apex Research, Aug 12

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This story first appeared in TheEdgeProperty.com pullout on Aug 15, 2016, which comes with The Edge Financial