• Maintain NEUTRAL and TP of MYR0.91, 1% upside. Tambun Indah’s 4Q23 results came in below with expectations from lower-than-expected margins. New sales of MYR98.8m in the quarter led to a full-year property sales of MYR246m, exceeding management’s initial target of MYR150m. We keep our call on the stock as management’s conservative launch plans should limit the upside to earnings.

• 4Q23 results review. Revenue increased by 19.7% QoQ (+7% YoY) mainly due to the higher property sales as TILB launched a new project, Vila Botani, in the quarter. QoQ growth in PBT was lower at 5.5% as recently launched projects were still at the initial stage of construction. Core net profit dropped by 13% QoQ (-7.7% YoY) from a higher effective tax rate of 36.6% in 4Q23 due to certain non-tax deductible expenses.

• New launch driving up sales. 4Q23 new property sales of MYR98.8m accounted for 40% of FY23 sales of MYR246m. The sharp rise in 4Q was due to the launch of Vila Botani (take-up rate: 28%), which has an expected GDV of MYR301m. The take-up rate for its ongoing projects dropped to 62% from 80% in 3Q23 following the aforementioned launch. On specific projects, the take-up rate for Mutiara Indah saw the biggest jump QoQ to 64% from 46%, Aster Villa’s ticked up to 95% (3Q23: 94.6%) while Pearl Impiana increased to 77% (3Q23: 75%).

• FY24 sales target at MYR150m. Despite widely beating its sales target in FY23, management is keeping its sales target at a conservative MYR150m for FY24. Nevertheless, the six ongoing projects with a total GDV of MYR499.8m and unbilled sales of MYR122.9m should support earnings in the next 2-3 years. Having just launched Vila Botani in end-2023, its sales should continue to flow to FY24, management is conservative on its pipeline launches in this FY, providing a rough guidance of >MYR100m GDV planned for the year.

• Forecasts. We lower our FY24F-25F earnings by 4-7% after adjusting our cost assumptions, and we introduce our FY26F earnings of MYR52m. We expect gross margin to gradually improve, as FY23 margins were impacted from the provisions made for a low-cost housing project.

• Valuation. Our TP is based on a 70% discount to RNAV, with a parity ESG premium or discount inked in, as TILB’s ESG score of 3.0 is in line with the country median.

Source: RHB Research - 29 Feb 2024