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Home / 2016: Annual Report: Management’s Discussion & Analysis

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MANAGEMENT’S DIRECTOR’S MESSAGE

Financial Performance
Group revenue for the financial year ended 31 December 2016 (FY2016) was marginally lower at RM360.8 million compared to RM367.7 million previously, a consequence of the muted market conditions. The property development and property management segments remained the Group’s key revenue generators, contributing RM356.6 million or 99% (FY2015 : RM363.9 million or 99%) of the Group’s total revenue, in line with new sales and construction progress on ongoing projects. The Group also registered higher revenue of RM4.2 million (FY2015: RM1.9 million) from the investment holding segment, with GEMS International School contributing its first full year revenue.

The favourable product mix in property development and investment holding, as well as progress billings being on track led to net profit attributable to shareholders increasing 11.0% to RM112.2 million in FY2016 from RM101.1 million in FY2015. A net fair value gain of RM5.2 million on investment properties also contributed to the higher profit. Correspondingly, basic earnings per share increased to 26.4 sen in FY2016 from 23.9 sen a year ago.
The Group had also maintained a sound balance sheet at year end, with shareholders’ equity rising to RM536.4 million from RM459.8 million in the previous year mainly on higher retained earnings. Total borrowings were lower at RM138.2 million from RM188.4 million in the previous year-end, as did cash and bank balances at RM120.8 million from RM183.9 million.

This resulted in the Group maintaining a healthy net gearing of 0.03 times, providing us with the flexibility in funding business expansion strategies in the future.

Dividends
An interim single-tier dividend of 3.0 sen per share in respect of FY2016 was paid on 16 February 2017.

The Board had also proposed a final single-tier dividend of 7.0 sen per share for shareholders’ approval at the forthcoming Annual General Meeting.

Together, the total dividend declared in respect of FY2016 amounted to 10.0 sen per share, representing a dividend payout of approximately RM42.8 million which constitutes 40.7% of the Group’s net profit, excluding any valuation gain and/or loss on investment properties.

 

Operations Review

Property Development Since 1994, Tambun Indah has accumulated extensive experience in property development with a strong track record emphasising on affordable and quality products for over two decades. This is evident in the strong 80.3% take-up across ongoing projects with a total Gross Development Value (GDV) of approximately RM1.4 billion in end-FY2016. Nonetheless, the tough operating environment resulted in the Group moderating its planned launches in the year under review. During FY2016, the Group recorded RM229.1 million (FY2015: RM263.4 million) of new property sales. As at end-FY2016, total unbilled sales amounted to RM196.9 million which would be recognised in the next two to three years.

 

 

As at 31 December 2016, the Group’s on-going projects were as follow:-

Pearl City

 

 

 

 

 

 

As the flagship project entered its seventh year of development, Tambun Indah unveiled mid-upper range residences in the heart of the township, with the intention to appeal to discerning buyers who value convenience and quality living. These comprise serviced apartments of Avenue Garden, and double-storey homes of Pearl Tropika, both of which report sturdy sales.

Avenue Garden
Located at the heart of Pearl City township, the development
is a stone’s throw away from the GEMS International
School. The 17-storey building has 5 levels of multi-storey
carpark and 312 units of serviced apartments with built-up
areas ranging from 775 square feet to 1,163 square feet.
Pearl Tropika
Pearl Tropika development comprises 68 units of linked
double storey Semi-Detached, 52 units of double storey
Semi-Detached and 159 units of double storey terraces.

 

 

 

 

Property Investment
The Group’s portfolio of Investment Properties comprises mainly of prime assets within its integrated developments.

To further enrich Pearl City’s identity as an integrated township, the Group, through its joint venture company, TNC Capital Sdn Bhd, completed the 1st phase of Pearl City Mall, with a gross floor area of approximately 300,000 square feet and was master leased to a mall operator, C-Mart (a popular shopping mall chain in Northern Peninsular targeting the mass market). The mall commenced operations in April 2016.

GEMS International School (Pearl City) opened its doors to students in September 2015. The first phase of the school has the capacity to cater up to an enrolment of 1,500 students. GEMS International School being the first full fledge private international school in Mainland Penang, together with Pearl City Mall forms part of the Group’s investment properties in Pearl City Business Park.

Operational and Financial Risks
Inherent to the property development sector, the Group’s operations are mainly affected by the economic fundamentals, changes in government policies and regulation and timing in obtaining approvals and licenses, in particular the developer’s license and advertising permits.

The property development environment for 2017 is expected to be challenging, amidst stringent mortgage lending by the banks as well as weaker consumer sentiment. Factors which have affected local businesses and continue to be of concern.

The Group is vigilant of the current economic condition and takes considerable steps to minimise the risk by having the right product mix, supplemented by a managed cost structure and a sound financial position. The Group also continually enhances brand visibility through strategic marketing and advertising via multitude channels, including proactive engagement in the social media.

The Group sets its strategy and priorities in planning for its development project, prepared for the challenging times ahead and to seize opportunity when it arises.

The Group faces competition from new and existing players entering the market. The Group has taken pro-active measures to mitigate these risks which include reviewing its development and marketing strategies in response to the ever changing market conditions and to adopt different development concepts and innovative designs that will position itself to meet the needs of the target market.

Overall, the Group manages the risks inherent to the property development sector with prudent financial management and an efficient business model. The management’s team commitment is evident by the Group’s sound financial position, its ability to withstand challenging times and deliver commendable results over the years.

Growth Strategies
Sector headwinds notwithstanding, we at Tambun Indah recognise the on-going demand for affordable residences especially in the landed residential segment, and will strive to fulfill the requirements of our target markets. To this end, we hope to launch new projects with total GDV of approximately RM170 million in FY2017

Pearl 28 features 28 units of linked double storey
Semi-Detached and 2 units of double storey bungalows; and with the spaciousness and contemporary design, will attract upgraders.

Pearl Saujana (Phase 1), Pearl City comprises 199 unit of terraces and 20 units of Semi-Detached, designed with first time homeowners and young families in mind, strategically located with various amenities and schools (public, private and private international schools) within its vicinity.

Palma Residence, which is located at a prime location in Alma Bukit Mertajam is a landed strata gated and guarded parcel comprising 90 units of terraces.

It must also be noted that the Group has pipeline projects with GDV of RM3.1 billion to be developed over the next seven years.

In addition to this, the Group will continue to be on the lookout for strategic land-banking opportunities to stretch our growth story even farther beyond.

Finally, we would explore new ways to strengthen our investment holdings, chiefly by engaging with potential partners to provide unique services in Pearl City Business Park for the benefit of residents in the township as well as the surrounding vicinity.

These strategies would be undergirded by the Group’s prudent capital management policy, as demonstrated in its strong financial position over the years. As an established property developer over the years, Tambun Indah plans to utilise its balance sheet to fund the core business of property development, with an eye on any additional requirements in the event of other opportunities such as land banking activities.

Conclusion
Going forward for FY2017, Tambun Indah plans to concentrate on its core business segment of property development
focusing on delivering quality and affordability to aspiring house owners.

Together with the support of our stakeholders and our Management and staff, we shall strive to better our performance.

 

Ir. Teh Kiak Seng
Managing Director