Tambun: Affected By APDL Delay

Tambun Indah FY15Q3 Financial Result

TAMBUN (RM mil)	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	86.2	60.0	130.4	110.1	116.8
Gross Profit	38.0	28.0	47.6	38.8	43.8
Gross%	44.1	46.7	36.5	35.2	37.5
PBT	32.9	22.2	41.3	35.1	34.8
PBT%	38.2	37.0	31.7	31.9	29.8
PATAMI	23.8	17.1	29.9	25.9	25.5
Property Rev	85.4	59.6	129.5
Property OP	31.6	21.6	40.6
Investment Rev	0.5	0.2	0.2
Investment OP	0.9	2.6	2.4
Total Equity	428.8	417.1	427.5	397.0	377.9
Total Assets	704.9	733.7	667.5	661.8	636.8
Trade Receivables	117.9	125.0	146.0	118.0	117.0
Prop dev cost	94.5	67.6	59.5	72.5	83.9
Inventories	2.2	2.2	2.2	2.4	0.3
Cash	118.4	143.4	116.0	131.5	151.1
Total Liabilities	273.3	314.0	237.1	262.4	256.6
Trade Payables	82.5	104.2	95.9	103.9	93.1
ST Borrowings	31.4	39.2	30.9	35.2	13.8
LT Borrowings	153.2	165.0	119.1	117.7	133.2
Net Cash Flow	-13.0	12.0	-12.3	17.7	37.3
Operation	27.6	3.6	28.8	-5.5	3.0
Investment	-28.9	-28.3	-11.6	-12.8	8.5
Financing	-11.7	36.7	-29.6	36.0	25.8
Dividend paid	41.0	12.6	12.6	26.8	26.8
EPS	5.61	4.05	7.10	6.24	6.22
NAS	1.01	0.99	1.01	0.94	0.92
D/E Ratio	0.15	0.15	0.08	0.05	Net cash

Even though Tambun's FY15Q3 result has improved compared to preceding quarter of FY15Q2, its revenue and PATAMI actually drop 26% and 6.7% compared YoY.

In FY15Q3, it only registered RM21.8mil new sales, compared to RM25.1mil in Q2 & RM146.3mil in Q1.

Up to 9M15, it only achieved RM193mil new sales, which is less than half of its target of RM400mil in FY15.

To recap, Tambun manage to achieve RM429mil and RM500mil new sales in FY14 & FY13 respectively. 

Latest unbilled sales drop further to RM343.2mil from RM408.1mil a quarter ago.

Is Tambun's sales really that bad?

I think those who have visited its sales office or recently bought its properties might not think so.

It is not a secret that many property developers in Penang are facing a delay in getting Advertising Permit & Developers License (APDL) from the federal government.

The approval process which normally takes 2 weeks is now delayed to many many months with no clear reasons (though many should roughly know the reason).

Up until end of Q3 (Sep15), I think Tambun still could not get the APDL for its upcoming projects such as Avenue Garden (GDV RM92.8mil), Raintree Park 2 (GDV RM217.7mil) & Pearl Tropika (GDV RM138.4mil).

That's why it can only recognized RM21.8mil new sales from its existing projects.

I understand that Tambun has already obtained the APDL now and we should see vast improvement in its new sales in FY16, if not in FY15Q4, depends on when the S&P agreement are signed.

Judging from the interest or "registration" for its upcoming projects, Tambun should be able to meet its target RM400mil new sales in FY15 if no delay in APDL.

There is a high demand for properties in Pearl City in which its latest officially launched project Raintree Park 1 which consists of 310 units properties are almost 100% sold out.

The average take up rate for its on-going projects is an encouraging 91%.

Because of this delay in new project launch, Tambun might not be able to produce "consistent" quarterly results in the near future.

Its upcoming quarterly results might be "patchy".

Tambun has started to collect rental from GEMS International School in Pearl City, which is estimated to be RM3.5mil a year according to analyst.

Pearl City Mall which is scheduled to be operational in the first half of 2016 will also contribute to Tambun's rental income later.

Unlike GEMS, Tambun is indirectly involved in the operation of the mall via a 50/50 joint venture.

Besides, there might be another future rental/operation income in medical center in Pearl City.

Tambun's borrowings have increased due to the addition of investment property to the group.

Asiapac registered a massive fair value gain in investment properties after its Imago Mall was completed. Will Tambun do the same for its Pearl City Mall?

Anyway, Tambun has revised its dividend policy to exclude the valuation gain/loss from its investment properties.

A first interim dividend of 3 sen for FY15 has been announced, which is similar to last year.

I'm confident that Tambun should be able to pay at least 9sen dividend for FY15, which means a yield of 6.4% at share price of RM1.40.

Its FY15 EPS should be able to exceed 20sen and this will give it a relatively low PE ratio.

I think all these should provide a good support for its share price.

If the sales recognition of the delayed projects are all recognized in 2016, then I guess year 2016 should be an impressive year for Tambun, as long as there is no more delay in APDL approval.

Tambun is the "pioneer" and also "longest serving" stock in my portfolio started since mid-2013. It is also the one and only stock which has ever occupied my core portfolio.

Of course I have pared down my shareholding in Tambun gradually since 2014.

As I wish to limit my portfolio to maximum 15 stocks, I did think of selling all Tambun shares to free up some space, because share price of property stocks are not expected to do very well in the next one or two years.

Once, I thought of this seriously on bed before I slept and decided to sell all Tambun's shares the next morning. However, in the next morning, I changed my mind and decided not to sell.

I'm not asking readers to buy or not to sell shares of Tambun. My position is different as my remaining Tambun shares are already "free shares" and I plan to stay with it for a special reason.