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Home / 2011 Annual Report: Chairman’s Statement

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Dear Shareholders,

On behalf of the Board of Directors of Tambun Indah Land Berhad (Tambun Indah or the Group), I am pleased to present to you the Annual Report 2011 and the audited financial statements for the financial year ended 31 December 2011 (FY2011).

FY2011 was a good year for the Malaysian property market as a whole. According to data from the Valuation and Property Services Department of the Ministry of Finance, the number of transactions rose 14.3% to 430,403 in FY2011 while values climbed 28.3% to RM137.8 billion, driven mainly by the residential property segment.

The Penang property market also enjoyed uptrends throughout the year, with rising demand for both developments on the island as well as on the mainland, where most of Tambun Indah’s land bank is located.

In fact, according to a report by Henry Butcher Malaysia, the first half of 2011 saw the number of transactions in Seberang Perai grow by 74.3% to 9,679 while values rose 66.3% to RM2.6 billion when compared to same period in 2010.

Financial Performance

Being in the right place and the right time, and with the right products attuned to buyers’ lifestyles, the Group was able to tap into this rising demand for property in Penang. As a result, we were able to continue to build upon what we achieved in FY2010.

Revenue rose 49.8 % to RM191.8 million from RM128.1 million previously – a record-high in Tambun Indah’s corporate history. In terms of property sales performance, the Group sold 912 units of properties; more than double that of the 396 sold in FY2010.

More than half of those sales came from the various projects in our flagship Pearl City project, with other developments also launched in the fourth quarter of 2010 and 2011, like Tanjung Heights, Dahlia Park and Impian Residence, contributing significantly.

Alongside the higher top line, Tambun Indah’s gross profit increased 55.4% to RM61.2 million from RM39.4 million in FY2010, which reflected the firmer prices and strong demand for our properties.

The Group saw a broader operating expenditure (OPEX) base resulting from more projects undertaken, as well as one-off RM2.7 million listing expenses from our listing on the Main Market of Bursa Malaysia in January 2011.

Tambun Indah’s strong revenue growth enabled profit before tax to rise by a healthy 29.3% to RM46.8 million from RM36.2 million previously while profit after tax climbed 28.1% to RM33.7 million from RM26.3 million in the same period last year. Profit after tax and minority interest, however, slipped 7.1% to RM23.4 million from RM25.2 million a year ago, due largely to the increased minority interest.

Basic earnings per share dipped 7.0% to 10.6 sen versus 11.4 sen in FY2010, based on Tambun Indah’s share capital of 221 million ordinary shares of RM0.50 par each.

Balance sheet remained healthy with net gearing of 0.25 time, contrary to a net cash position in FY2010. While total borrowings have increased 237.9% to RM78.0 million from RM23.1 million previously, due mainly to loans taken to purchase additional land banks, cash and bank balances stood at RM39.3 million, up 44.6% from RM27.2 million last year. Shareholders’ equity was up from RM119.72 million in FY2010 to RM155.5 million in FY2011.

We are generally pleased at how Tambun Indah did in FY2011 and how well the Group was able to benefit from the rising demand for Mainland Penang property. Going forward, we believe our strong fundamentals and the opportunities inherent within the market provide a strong cornerstone from which we can build upon.

Dividends

As Tambun Indah has committed itself to a progressive dividend policy of paying 40% to 60% of the Group’s net profits to our shareholders as dividends, we are proposing a first and final tax exempt dividend of 3.8 sen per ordinary share of RM0.50 each for the financial year ended 31 December 2011.

This is subject to the shareholders’ approval at the Group’s forthcoming Annual General Meeting.

Corporate Developments

  • Acquiring Pridaman Sdn Bhd (“Pridaman”)

On 27 July 2011, the Company completed the acquisition of 500,000 ordinary shares of RM1.00 each, representing the entire issued and paid up share capital of Pridaman for total cash consideration of RM4.65 million.

This acquisition resulted in the increase of our land bank and project GDV by 8.7 acres and RM35.8 million respectively.

 

  • Acquiring a 45% stake in Ikhtiar Bitara Sdn Bhd (“Ikhtiar Bitara”)

On 9 August 2011, the Company completed the acquisition of 45,000 ordinary shares of RM1.00 each, representing 45% of the issued and paid up share capital of Ikhtiar Bitara for total cash consideration of RM1.46 million. Following the acquisition, the Group would stand to benefit from the profit and cash flow contributions from Ikhtiar Bitara in the near future, with the estimated gross development profit attributable to the proposed development project amounting to approximately RM6.0 million.

  • Acquiring Premcourt Development Sdn Bhd (“Premcourt”)

On 22 September 2011, the Company acquired 250,000 ordinary shares of RM1.00 each, representing the entire issued and paid up share capital of Premcourt for total cash consideration of RM5.5 million, where RM5.0 million was paid to Messrs. Siram Permai Sdn. Bhd. and Tah-Wah Sdn. Bhd. (collectively referred to as the “Premcourt Vendors”) in accordance with the Premcourt Vendors’ respective shareholding proportions, on the completion date. It was agreed that the balance of RM500,000 would be paid to Premcourt Vendors within seven days from the date Premcourt obtained the planning permission and/or development order in respect of the project.

On 19 March 2012, Premcourt had obtained planning permission/development order from the local authorities. Thus, the Company had on 22 March 2012 paid the balance of RM500,000 to the Vendors accordance to their respective shareholding proportions.

This acquisition effectively increased our project GDV by RM180 million, and the project is expected to be launched in FY2012.

 

  • Acquiring a 60% stake in Palmington Sdn Bhd (“Palmington”)

On 4 May 2011, the Company successfully acquired a 60% stake in Palmington, comprising 3.5 million ordinary shares of RM1 each, for a purchase consideration of RM3.5 million.

On the same day, Palmington entered into a master agreement with Pembangunan Bandar Mutiara Sdn Bhd (“PBM”) to buy 526.8 acres of undeveloped land in Simpang Ampat, Penang, for RM233.2 million. PBM holds a 40% stake in Palmington.

This corporate exercise resulted in our project GDV increasing by RM2.2 billion.

 

  • Investment into Ascention Sdn Bhd (“Ascention”)

On 29 December 2011, Tambun Indah wholly-owned subsidiary TKS Land Sdn Bhd acquired the balance 50% stake in property developer Ascention for a price consideration of RM200,000. The acquisition was in line with our strategy to enhance the Group’s profit.

This acquisition resulted in our land bank in Bukit Mertajam, Penang increasing by 3.9 acres.

 

  • Rights and bonus issue

On 19 January 2012, the Group proposed a corporate exercise that would involve the issuance of 88.4 million new ordinary shares of RM0.50 each and 44.2 million free detachable warrants, on a two rights shares plus one free warrant for every five existing shares basis.

This exercise, which was expected to raise a minimum of RM44.2 million to partly fund our Pearl City and other development projects, will increase Tambun Indah’s share capital to RM154.7 million, comprising of 309.4 million shares of RM0.50 par value.

Similarly, an employees’ share option scheme (“ESOS”) of up to 5%, or 17.7 million new shares, of the issued and paid-up share capital for eligible persons of the Group was also proposed.

The corporate exercise has been approved by Tambun Indah’s shareholders at a recent Extraordinary General Meeting, pending the approval of the Securities Commission and other regulatory bodies.

 

  • Perquest Sdn Bhd (“Perquest”) enters into Butterworth development joint venture

On 2 April 2012, the Group’s wholly-owned subsidiary Perquest entered into a joint venture agreement with landowners of a 3.26 acre plot of land in Butterworth, Penang, with intention to develop commercial and residential property worth an estimated GDV of RM37.5 million.

Future Outlook

Penang’s economy has been growing strongly over the past few years. According to data from the Malaysian Government, in 2010 the state was the top investment destination in the country, attracting RM12.2 billion in investments.

Last year, according to the Malaysian Investment Development Authority (MIDA), the state was second behind Sarawak in terms of total investment, or RM14.0 billion, but first in the country in terms of approved manufacturing investment, or RM9.1 billion.

The Penang success story, together with tourism and Malaysia My Second Home (MM2H) initiatives over the past few years, have resulted in a spillover benefit for the state’s property market, with demand and prices on an uptrend.

The relatively affordable property prices in Mainland Penang, the state’s burgeoning industrial sector and the positive buzz generated by improving transportation infrastructure have resulted in a rising trend of population shift from the island to the mainland.

As a property developer with a most of our land bank in Mainland Penang, we are poised to benefit from such a scenario.

However, opportunities only turn into rewards if they are grasped firmly. To that extent, our flagship Pearl City project, strategically located in Seberang Perai Selatan, will help us tap into such opportunities.

At the same time, the Group’s latest project on Penang Island, Straits Garden, highlights our desire to seek out new land banks to add to our portfolio.

Tambun Indah will continue to seek out more opportunities in the state as we look to tap into the Penang success story. We will also be open to other opportunities outside of the state as and when they arise.

Corporate Governance

The Board remains committed to upholding best practices of corporate governance within the Group to protect shareholders’ value and create sustainable earnings for the Tambun Indah Group.

These measures are detailed in the Corporate Governance Disclosure in this Annual Report.

Appreciation

On behalf of the Board, I would like to record my gratitude to my fellow Directors, management and the staff of Tambun Indah Group for their commitment and hard work in enabling us to achieve an outstanding financial year.

At this point in time, I would like to welcome Taufiq Ahmad @ Ahmad Mustapha Ghazali and Lai Fook Hoy to the Board of Directors as Independent and Non-Executive Directors.

I would also like to pay tribute to former Non-Independent and Non-Executive Director Dato’ Hong Yeam Wah, and Independent and Non-Executive Directors Ong Eng Choon and Dato’ Mohamad Nadzim Shaari, who have left the Board to move on to new ventures. We wish them all the best.

Finally, I would also like to thank our shareholders, business associates, regulatory authorities and customers for their trust and confidence in the Group.

Thank you.

Tsai Yung Chuan

Chairman