RHB Research maintains Buy on Tambun Indah

PETALING JAYA: RHB Research has maintained its buy call and target price of RM3 on Tambun Indah Land Bhd following news of the property developer's acquisition of 209.54 acres of land in Penang.
"We believe that Tambun Indah is set to be the largest listed landbank owner in Penang mainland. The acquisition will likely boost the company's remaining landbank in Pearl City to almost 800 acres, and its estimated gross development value (GDV) to about RM4.4 billion.
"We still see potential upside in total GDV as new players such as Eco World and IJM Land, which entered at higher land costs (RM40 psf and RM18.50 psf, respectively), may launch their products at higher selling prices in Simpang Empat/Jawi by year-end.
"Land parcels for the proposed golf course and theme park in Batu Kawan that will likely be awarded at higher pricing are expected to spur another round of revalued net asset valuation (RNAV) re-rating for Penang mainland players," it said in its research note yesterday.
Last Friday, Tambun Indah announced that it had signed a conditional sales and purchase agreement with TPPT Sdn Bhd for the proposed acquisition of 27 parcels of freehold land adjacent to the southern side of Tambun Indah's flagship Pearl City township.
The total purchase consideration is RM150 million, which will be funded via RM100 million debt and RM50 million internal funds.
"Given Tambun Indah's net gearing of only 3% based on its latest balance sheet, the debt financing is estimated to increase the ratio to about 30% by fourth quarter, upon completion of the acquisition. The gearing level is in line with the industry average and manageable for Tambun Indah considering its consistent cash flow coming from the township project.
"We see minimal impact on our FY14-15 earnings forecasts as we incorporate the incremental interest expense and fine-tune our margin assumptions slightly given the low blended average land cost of RM16 psf to RM17 psf," said RHB Research.