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Home / 2013 Annual Report: Chairman’s Statement

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Dear Shareholders,
Against the backdrop of cooling measures announced by both the Federal and State Governments and more stringent requirements imposed by banks on loans for the purchase of property, many property buyers were cautious in their purchase decisions during 2013.

However, affordable homes in growth areas which are supported by good transport connectivity were highly sought-after. Your company, a pioneer in developing innovative yet affordable property in mainland Penang since 1994, was able to weather the volatility in the property sector.

On behalf of the Board of Directors of Tambun Indah Land Berhad (Tambun Indah or the Group), I am pleased to present the Annual Report and the Audited Financial Statements for the financial year ended 31 December 2013 (FY2013).

Financial Performance

The continued demand for affordable homes, coupled with our good construction progress of the ongoing projects propelled Tambun Indah to achieve its best-ever performance in FY2013.

Group topline surged 26.9% to RM376.4 million from RM296.7 million in the previous year, mainly due to improved take-up rates and higher billings from the Group’s ongoing projects. Correspondingly FY2013  profit before tax increased 49.0% to RM117.7 million compared to RM79.0 million in FY2012. I am pleased to report that basic earnings per share rose to 19.8 sen per share, 32.4% higher than the 14.9 sen per share in FY2012.

The Group’s total borrowings increased somewhat to RM98.2 million from RM83.8 million a year ago, largely due to higher short-term borrowings for project financing purposes.

Nonetheless, our balance sheet remained robust, with shareholders’ equity rising 38.9% to RM310.1 million from RM223.2 million a year ago, while cash and bank balances rose 31.2% to RM125.9 million from RM96.0 million previously.

With its net cash position at end- FY2013, the Group is in a good position to fund additions to its landbank and to undertake growth strategies for future expansion.

Dividends

Tambun Indah has in place a dividend policy of distributing 40% to 60% of net profit to shareholders.

An interim single-tier dividend of 2.0 sen per share in respect of FY2013 was paid on 18 February 2014. Additionally, the Board is pleased to propose a final single-tier dividend of 4.6 sen per share for shareholders’ approval at the forthcoming Annual General Meeting. Together the total dividend payable for FY2013 will be 6.6 sen per share, or approximately RM26.0 million which constitutes 40.2% of the Group’s net profit.

Award

We were delighted and honoured to be selected to Forbes Asia’s list of “200 Best Under A Billion”. The criteria for selection are sales growth, earnings growth and return on equity for public listed companies in the Asia Pacific region with annual revenue between USD5.0 million and USD1.0 billion.

To be one of the 200 selected out of about 15,000 companies is a remarkable achievement for Tambun Indah, as it not only affirms our strong track record in the past, but also strengthens our resolve to sustain our growth in the future.

Corporate Developments

• TNC Capital Sdn Bhd (TNC) to develop shopping complex

On 28 May 2013, Tambun Indah announced that its 60% subsidiary Palmington Sdn Bhd (PSB) had entered into a Shareholders’ Agreement with
Ripro Sdn Bhd to jointly develop 15.55 acres of land within Pearl City into a shopping complex via a new company TNC.

Concurrently, PSB entered into a Sale and Purchase Agreement (SPA) with TNC for the sale of the said 15.55 acres to TNC for a total cash consideration of RM 12.9 million. The proceeds from the land sale will be utilised as working capital for PSB, including the construction of the said shopping complex.

With the development of the shopping complex, the Group should benefit from the increased vibrancy in Pearl City, as well as a recurring rental
income stream.

• Acquisitions of the balance of equity interests in two subsidiaries – Palmington Sdn Bhd (PSB) and Tambun Indah Development Sdn Bhd (TIDSB)

On 21 June 2013, Tambun Indah entered into a share purchase agreement with Pembangunan Bandar Mutiara Sdn Bhd, a wholly-owned subsidiary of Nadayu Properties Berhad (Nadayu)  to acquire the balance 40% stake in PSB, and the balance 30% stake in TIDSB for a total consideration of RM88.2 million, to be satisfied by the issuance of 55.0 million new Tambun Indah ordinary shares at an issue price of RM1.30 each and a cash payment of RM16.7 million.

Following approvals from regulatory authorities and the respective shareholders of Tambun Indah and Nadayu, the acquisitions were
completed on 18 November 2013.

As PSB and TIDSB are involved in the development of the Pearl City project, the acquisitions will allow the Group to consolidate the entire future earnings from the Pearl City project into its accounts.

• Private placement of up to 15.0 million new ordinary shares of RM0.50 each in Tambun Indah (private placement)

On 21 June 2013, Tambun Indah proposed a private placement of up to 15.0 million new ordinary shares of RM0.50 each, representing up
to 4.71% of the issued and paid-up capital of Tambun Indah.

The placement, at an issue price of RM1.32 per share, was completed on 2 August 2013. The proceeds of RM19.8 million were largely utilised
to fund the acquisition of the balance equity stakes of PSB and TIDSB.

• Acquisition of Novinia Sdn Bhd (Novinia)

On 12 December 2013, Tambun Indah acquired two ordinary shares of RM1.00 each in Novinia, representing its entire issued and paid-up capital
of Novinia, a property development company, for total cash consideration of RM2.00.

Novinia had on 21 October 2013 signed a SPA with Pesaka Saujana Development Sdn Bhd (Pesaka) to acquire two pieces of land measuring a total of 20.9 acres for a total consideration of RM12.7 million. The two pieces of land are adjacent to Pearl City, and have residential development potential.

The purchase of the said land pursuant to the SPA was completed in January 2014. Funding for the land purchase and its future development will be financed through internally-generated funds and bank borrowings.

The acquisition is part of the Group’s strategy to identify suitable land in strategic locations to expand its landbank, and to enhance Tambun Indah’s standing as a property developer in Penang.

Future Outlook

Penang has always been a location of choice for investors, both foreign and local. Given its attractiveness from the investment perspective the
labour force in the state had grown steadily, increasing by more than 11% over the past 3 years. This is one of the main drivers for the healthy and
vibrant property market.

The consensus of property consultants is that the property market in mainland Penang will be bullish following the opening of the Sultan Abdul
Halim Mu’adzam Shah Bridge linking Batu Maung and Batu Kawan. Also with the state’s emphasis on the development of Batu Kawan’s new township and industrial park, growth in Seberang Perai Selatan will be robust. That several KL-based developers are also establishing their presence in the area further supports this.

Property prices on the island are slowly but surely moving beyond the reach of much of the working population. Therefore purchasers have been
actively seeking for alternatives on the mainland. Tambun Indah’s Pearl City development is well placed to meet this demand, and the strong takeup rate for the Group’s projects confirms this. In this light, the Group will continue with its focus on providing high quality and affordable homes. We believe that our reputable branding and good track record will continue to sustain demand for our property projects.

Tambun Indah will be rolling out new residential and commercial projects with a projected GDV of RM690 million in FY2014. Together with the GDV of RM 1.34 billion from existing project as at end-FY2013, the Board is positive on the prospects of the Group in the current year.

Corporate Social Responsibility (CSR)

CSR is an integral part of the Group’s business strategy. We are committed to making positive contributions to the communities where our projects are located.

Our CSR initiatives are highlighted in the Statement on Corporate Social Responsibility of the Annual Report.

Corporate Governance

Your Board of Directors continues to uphold and implement high standards of corporate governance, risk management, and internal controls throughout the Group.

These measures are to ensure the sustainable growth of the business, and continued creation of shareholder value.

The measures, the Group have adopted to ensure this, are detailed in the Corporate Governance Disclosure in this Annual Report.

Appreciation

FY2013 was a year of successes for the Group. On behalf of the Board, I wish to extend our sincere appreciation to the many parties which
contributed to the Group’s success.

I would like to express gratitude to our shareholders for their continued trust and confidence in Tambun Indah.

To the management and staff, we are grateful for your hard work, dedication and commitment which contributed immensely to the success of the Group.

Our sincere thanks also go out to our valued customers, bankers, business associates, and the relevant authorities for their cooperation and support during the year.

I would like to pay tribute to two members of the Board who resigned during the year, Mr Tsai Yung Chuan and Mr Thaw Yeng Cheong. Their worthy contributions to the Board and the Group are acknowledged with thanks. We welcome Ms Tsai Chia Ling’s re-designation as a non-executive non-independent director. To all my fellow directors, I thank you for your counsel, participation and support during the year.

Thank you.
Lai Fook Hoy
Chairman