RHB Research maintains Buy on Tambun Indah

KUALA LUMPUR: RHB Research has maintained its Buy call on Tambun Indah (TILB) with a higher fair value of RM2.05 from RM2.
“The recent share price weakness provides a good opportunity to accumulate quality property stocks such as TILB. Maintain Buy,” it said in a note on Thursday.
RHB said the group is acquiring a 24.1-acre freehold land held for development purposes, which is adjacent to Pearl City, from BLS Mega Sdn Bhd for RM14.7mil.
It said the acquisition will be financed by internal funds and borrowings, and is expected to be completed by 1Q14.
“We are positive on management’s effort to continue widening TILB’s presence on the Penang mainland.
“The purchase consideration translates into a land cost of RM14 psf, which is lower than TILB’s current blended average book cost of RM18 psf for Pearl City,” it said.
RHB noted the price is also cheaper than the market price as the land parcel does not have access other than going through TILB’s land.
“The company’s typical high gross margin of 33%to 37% will therefore be sustainable. The new land will also boost Pearl City’s GDV by RM120mil to RM130mil to about RM2.8bil,” it said.
RHB said TILB only has 1% to 2% exposure to foreign purchasers. As buyers of Pearl City largely purchased the units for their own occupancy, the impact of the cooling measures announced in Budget 2014 is very minimal for TILB.
“Meanwhile, growth prospects on the mainland remain strong.
“The opening of the Penang Second Bridge in early 2014, growing job opportunities as a result of foreign and local investments, state-initiated catalytic projects in Batu Kawan, as well as landbanking by big players continue to be key catalysts for the stock,” it said.