[TheEdge] Tambun Indah likely to gain from potential revised lending policies

Tambun Indah Land Bhd
(Aug 23, 98 sen)
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 Tambun Indah Land Bhd’s second financial quarter ended June 30, 2018 (2QFY18) earnings beat our expectations but met the consensus.

 
Besides a sequential revenue growth of 20%, net profit grew 33%, due to an adjustment to budgeted cost for some recently completed projects (such as Avenue Garden) and a better product mix during the quarter.

As such, its first half of FY18 (1HFY18) earnings before interest and tax margin expanded to 46% versus 40% in 1HFY17.

New sales improved in 2QFY18, reaching RM31.2 million, versus RM22 million in 1QFY18, bringing 1HFY18 total sales to RM53.2 million. The take-up rates of some ongoing projects continued to improve. Rain Tree Park 2, Avenue Garden and Pearl Saujana Permai were 76%, 84% and 32% sold, versus 72%, 80% and 22% respectively in 1QFY18. While sentiment has improved slightly, we think the better take-up could also be due to the near-completion stage of Rain Tree Park 2 and Avenue Garden, which supported buyers’ confidence.

Tambun Indah has maintained its RM150 million sales target for FY18. Apart from continuing to sell unsold units worth about RM200 million, management also planned to roll out the Palma Residency project in Alma (gross development value [GDV]: RM48 million).

Due to space constraints, construction and infrastructure works have already started, while the project is now being previewed. Booking rates have already achieved the 25% to 30% mark.

Meanwhile, Palm Garden (GDV: RM11 million) in Pearl City may also be launched by end-2018 if foundation works can be completed on time.

We have fine-tuned our FY18 to FY19 earnings forecasts by 2% to 7%, as we understand that Rain Tree Park 2 and Pearl Saujana Permai will be completed in 4QFY18. Therefore, 4QFY18 is likely to also see some adjustments to budgeted cost of construction, which could possibly lift margins and earnings. Unbilled sales continued to fall to RM31.85 million as at 2QFY18, from RM48.6 million as at 1QFY18.

Tambun Indah, as an affordable housing developer with high exposure to first-time homebuyers, should likely benefit from the government’s potential revision of lending policies, which are targeted at the mid- to low-income group.

We also expect property sales in mainland Penang to gradually improve, as we understand that some newly launched projects in Seberang Perai by other developers were well taken up. — RHB Research Institute, Aug 23