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News Room

22 Apr 2013

Tambun Indah in talks to buy land in Seberang Perai

The Sun Daily

Kang Siew Li

KUALA LUMPUR (April 22, 2013): Tambun Indah Land Bhd, well known for its flagship Pearl City township development in Seberang Perai, Penang, is in talks with three landowners to acquire more land in Seberang Perai for development and is confident of concluding the deals by the end of this year, said its founder and managing director Teh Kiak Seng (pix).

He declined to reveal the exact size of the land, saying only that the group is looking for township land.

However, he pointed that land prices have doubled in Seberang Perai from the time Tambun Indah first bought land in the area in 1994 to develop Pearl City as more and more people relocate to Penang mainland from the island due to the latter's spiralling property prices.

Still, Teh sees no problem for the group to finance the acquisitions of land as it is currently sitting in a net cash position of about RM100 million, following the completion of a rights issue exercise that raised RM44 million in June last year.

"Our net gearing ratio of up to 0.5 times also allows room for the group to raise another RM110 million in borrowings," Tambun Indah financial controller Steve Neoh Sze Tsin told SunBiz in an interview held on the sidelines of the Aquilas-MIRA Investor Relations Day recently.

Themed "Tracking the Northern Lights", Aquilas Advisory (M'sia) Sdn Bhd and the Malaysian Investor Relations Association jointly hosted the event to showcase three Penang-based public-listed companies to the business media and investors.

Neoh also noted that the group's ongoing projects are worth RM1.5 billion in gross development value (GDV), thus providing earnings visibility.

"The take-up rate (for our projects) has been about 75% and so, I don't think we will have problems with future cashflow.

"The new landbank will be for future development use, that is, from 2015 onwards," he added.

Apart from Penang mainland, Teh said Tambun Indah is also scouting for land on the outskirts of Kuala Lumpur such as Kajang, Banting and Rawang for township projects.

"So far, we haven't found any suitable land (in the Klang Valley). But we are constantly looking for land in Penang and the Klang Valley. We will come to the Klang Valley only if the project is feasible," he said.

And unlike many of its local counterparts, Tambun Indah has no plans to venture into developing properties in Iskandar Malaysia, Johor.

"(We think) it's maybe too late to go there as a lot of land there have already been sold, with (development) plans submitted and a lot of projects ongoing, Also, land prices (in Iskandar) are no longer cheap and our focus is on affordable housing," said Teh.

This year, Tambun Indah will launch about RM250 million worth of new projects on the back of the RM800 million worth of projects launched in 2012.

"Majority of the launches will come from projects at Pearl City and the rest from our 10 projects in various locations such as Butterworth, Juru, Bukit Mertajam and Penang island," said Teh.

The group has set an internal target of a double-digit growth in net profit and revenue for the current financial year ending Dec 31, 2013 (FY13), driven by both new and existing projects. The group's unbilled sales stood at RM390 million at Feb 28, 2013.

Last year, Tambun Indah posted a 75% growth in net profit to RM40.81 million from RM23.38 million a year ago, while revenue rose 55% to RM296.95 million from RM191.84 million.

Teh also said the group adheres to a dividend payout policy of 40%-60% of its net profit each year.

"We are doing very well. To date, we have 3,600 houses under construction, of which 1,800 come from projects at Pearl City, which has an estimated total GDV of RM3 billion when completed. The remaining 1,800 units are located in our 10 other projects in Penang.

"And why are houses in Seberang Perai selling well? Because houses on Penang island have become too expensive. For example, a two-storey terraced house measuring 22 ft by 70 ft located in a gated community at Pearl City is going for RM380,000 while a similar property on Penang island would cost about RM800,000," he added.

Thus, it's not surprising why Teh is upbeat about outlook for the property market in Penang mainland, especially its Pearl City township with its location just 15 minutes away from the Penang Second Bridge.

"To date, we have completed about 5,000 houses or 40% of the 1,100-acre township, with another 2,000 units or 20% of the development now under construction. The remaining 40% will be launched in phases and will keep us busy till 2020," said Neoh.

On the 107-acre business park at Pearl City, Neoh said the component will house an international school, a hospital and a shopping mall, which will be completed before year-end.

"We do not plan to sell these (commercial) properties, but will keep them to generate recurring income."

Teh also said he has no plans to pare down his 46.7% stake in Tambun Indah, adding that he is "happy" with the current share price which recorded a 78.58% one-year return. Shares of the stock closed down 0.52% at 96.5 sen on Friday.