Tambun Indah sees upside in Pearl Ci

by **Cals** Thu 17 Oct 2013, 10:23

Business & Markets 2013

Written by Wei Lynn Tang of theedgemalaysia.com

Thursday, 17 October 2013 09:56

KUALA LUMPUR: Tambun Indah Land Bhd (TILB) may see better earnings from its Pearl City project in Penang with a proposed move to increase its stakes in Palmington Sdn Bhd and Tambun Indah (TI) Development Sdn Bhd.

The group will no longer be required to apportion parts of its consolidated profit to the non-controlling interests of Palmington and TI Development.

Upon the completion of the exercise, Palmington and TI Development will become wholly-owned subsidiaries of TILB, according to a circular to shareholders dated Oct 14. Palmington and TI Development are the developers of the RM2.71 billion Pearl City.

Analysts expect TILB to benefit from an appreciation in the book value of the two entities.

Based on valuation reports by appointed valuer Henry Butcher, the market value of RM430 million and RM104.5 million for Palmington and TI Development respectively represents a surplus of RM221.1 million or 70.47% over Palmington and TI Development’s properties’ net book value of RM313.7 million as at March 31, 2013.

“The outlook for the Tambun group is positive with prospects of increase in earnings post-acquisition as the group would have owned 100% of Palmington and Tambun Indah, instead of 60% and 70% previously,” said an analyst.

“That, along with increasing prices in the Penang property market, the group is now able to secure stronger and fuller earnings from the Pearl City project,” said the analyst, adding that the Tambun group had made a smart move into developments in the southern district of Seberang Perai, Penang where Pearl City is located.

To recap, TILB had in June proposed to acquire 40% and 30% stakes in Palmington and TI Development respectively from Pembangunan Bandar Mutiara Sdn Bhd, a wholly-owned subsidiary of Nadayu Properties Bhd.

TILB has 60% and 70% stakes in Palmington and TI Development respectively.

The proposed acquisition will be for a total consideration of RM88 million, to be satisfied via RM16.69 million in cash and RM71.5 million via an issuance of 50 million ordinary shares at a price of RM1.30 each.

The Pearl City project commenced in 2009 and is expected to be fully developed by 2020 with an estimated total gross development value of RM2.71 billion.

“The increase in earnings could bode well for the group as it seeks to develop vacant land parcels which will require capital expenditure,” said an analyst.

Henry Butcher’s valuation indicates a total market value of RM348.5 million of TILB’s vacant development land.
TILB’s EGM on the proposed acquisition is on Oct 31.

This article first appeared in The Edge Financial Daily, on October 17, 2013.