30 JEWELS 2013 Edition
Tambun Indah Land
Penang Mainland A Solid Place
¨ Capable management team
¨ The key Penang mainland property play
¨ Further expansion in GDV to drive upside in RNAV
Tambun Indah Land Bhd (TILB) is a developer based in Penang’s mainland. Its flagship project, the Pearl City township, is located at Seberang Perai Selatan, just 15 minutes away from the Penang Second Bridge.
TILB’s value is underpinned by its strategic anchor landbank, capable management, quality products, solid balance sheet and attractive dividend yield. It has 600 acres of land at Pearl City, a growing township that is just 50% developed. Being close to many established industrial parks, the growing working population creates a natural demand for properties, particularly in a proper residential community. TILB is a quality Penang mainland play. Other competitors in the area, such as Wing Tai and Asas Dunia are either not a pure play or have a weaker earnings track record.
Potential for further GDV expansion. Although we recently raised our GDV estimate for Pearl City (to MYR3.1bn), we still see further upside over the intermediate term. Penang’s mainland (the Batu Kawan area) will be very busy in the coming years. Apart from the growing industrial zone at Batu Kawan, the state government also plans to set up a premium outlet, golf course/theme park in the area. Malton will also develop a commercial cluster close to the Penang Second Bridge interchange. For residential purposes, TILB’s Pearl City would provide an ideal place for the working population. Its terrace houses have been enjoying a 10%-15% annual price appreciation over the past few years, and its current price is still at a fairly affordable MYR438k/unit. TILB’s property sales are underpinned by genuine demand, as buyers purchase the properties mainly for owner occupancy. Hence, the sensitivity to policy risks is very minimal.
EPS, DPS and RNAV enhancement from recent corporate exercise. We are impressed with the management’s ability to buy out the minority stake in Pearl City from Nadayu. TILB now claims the full ownership of its crown jewel, which is a big source of motivation for the management. Upon completion of the transaction in September, its EPS and DPS will see immediate enhancement, as the minority interest in P/L will be largely wiped out. The Nadayu shareholders (13%-14% post-exercise) will be passive in TILB’s operations, despite being set to be long-term investors in the company. Their entry cost at MYR1.30/share also signals their positive view on TILB.
Company Report Card
Latest results. 1Q13 net earnings saw a y-o-y growth of 28%. We expect TILB’s bottomline to grow at 35% and 56% for FY13-FY14 (after factoring the impact of the recent corporate exercise) respectively. Unbilled sales have risen to MYR500m in May from MYR425m in 1Q13.
Balance sheet / Cashflow. TILB’s balance sheet is solid, with a net gearing of only 4%. The gearing level is expected to rise slightly due to some new borrowings to fund the acquisition from Nadayu.
ROE. TILB’s ROE is on an expansionary trend. Its ROE was at 17% in FY11 and is expected to rise to 25%-30% over the next two years.
Dividend. The dividend yield for TILB is attractive at about 5%. The company has a dividend payout policy of 40%-60%.
Management. Ir. Teh Kiak Seng, with a shareholding of 47%, is the founder and currently the MD of the company. Ir. Teh is a civil engineer, and has more than 30 years of experience in the housing industry. The company is well-managed by a group of architects, engineers and finance professionals. Mr. Steve Neoh is its financial controller, joining TILB in 2008 after working in Tejari Technologies. His cumulative experience includes providing assurance and consulting services to public-listed and local corporations involved in the property development, construction, manufacturing and trading services sectors.
We value TILB at MYR1.71, based on a 20% discount to RNAV. In our opinion, a lower discount is deserved due to the limited quality Penang mainland plays in the market, as the other smaller players are either not pure mainland plays or lack a solid track record. We see long-term growth potential in TILB. Based on the current price, its FY14 P/E of 6x is undemanding, considering its above-sector average earnings growth and dividend yield.