IPO – Tambun Indah Land Berhad

IPO

• Public issue of 32 mil new ordinary shares of RM0.50 each comprising of:
1. 11.05 mil for Malaysian Public
2. 11.05 mil for eligible directors, employees and etc
3. 9.9 mil identified investors via private placement

• Issue and offer price of RM0.70per ordinary share

• Offer sale of 22.1 mil shares made available for application by bumiputra investors

• Closing date of the application for IPO shares: 6 January 2011

• Listing date: 18 January 2010

• Utilization of Proceeds: Out of 22.4 mil, 12.7 mil will spend on working capital, 7.1 mil on repayment of bank borrowings and 2.6 mil on listing expenses, which represents approximately 57%, 31.7% and 11.6% respectively. 1.2 mil of working capital will be spent on operating and marketing expenses and the rest will go to construction cost. 3.2 mil will repay the borrowings for Intanasia and 3.9 mil for TID development.

Background

• Involved in property development, investment holding and operation of car park as well as project and construction management in mainland Penang.
• The founder of the company is the managing director Ir. The Kiak Seng.
• Incorporation in 1994 as Tambun Indah S/B
• The company product was the 1st guarded & gated community and the 1st landed strata scheme property
• Structure of the group:
- Cenderaman - 100%
- Langstone – 100%
- Denmas Development - 100%
- Perquest – 100%
- Denmas – 100%
- Tokoh Edaran – 100%
- Epiland – 100%
- Tambun Indah Development – 70%
- Hong hong – 100%
- Tambun Indah S/B – 100%
- Intanasia – 100%
- TID Development – 100%
- Juru Heights – 100%
- TKS Land – 100% - CBD Land – 50%
- Jasnia – 100%
- Zipac – 100%

Highlights
• Purpose of listing: enable the group to gain recognition and further enhance reputation and image in order to expand the business and to move in line with the big players in the local market.
• Catalyst: Building the second Penang bridge, which connect Batu Maung and Batu Kawan, is regarded a catalyst to add value to the company since its products are near to the bridge.
• Dividend policy: The Company has a progressive dividend policy of distributing 40% to 60% of their PAT attributable to shareholders excluding non-recurrent items.
• Net Cash: Cash & cash equivalents – Short & long term debt = 26.947 (pre IPO), 46.747 (post IPO), where most developers in Penang island have higher gearing ratios.
• Instead of marketing the Company’s products, I would prefer to compare it with its peers.

	Price	Mkt Cap	P/NTA	BPS	Total debt /C.Equity	Div Yield	P/E
Ivory	1.17	217m	1.26	0.93	95.44%	0%	9.64
Hunzpty	1.71	332m	0.79	2.18	21.14%	3.26%	4.20
E&O	1.31	1.09b	0.95	1.38	90.34%	2.90%	20.03
Tambun Indah	0.70	154m	1.4	0.58	10.32%	6-7%	~5.5-6

• Assuming products’ location, value, quality among these companies remains constant, what would you think about these 4 companies purely based on the figures above.
• First, for safety purposes, I’d look at debt. Somehow, Ivory, Hunzpty and E&O have higher gross gearing compared with Tambun Indah. In such circumstances, the concern of the Company using its IPO proceeds to repay borrowing will no longer an issue. With Net cash on hand, Tambun Indah is considered as healthy and has lower loan default risk.
• Since Tambun Indah has the highest price to NTA among the peers, the important question is whether the premium is worthy or not? Under the circumstance where in that fact that Penang Island is short of affordable properties to new generation, second thing comes to my mind is whether people will compensate them with cheaper property and bigger space if the only condition is that they have to live far away from the heart of the city – You will never know – it depends. However, there is a risk there. Hopefully, someone can answer. I’m not sure whether the second link bridge has been officially approved. If not, the properties may have a hard time to turn hands. If yes, everything will be in place.
Results:

• I wouldn’t spend time on result since the figure below tells it all.

Income Statement Ratios	2007	2008	2009	2010
Gross Profit Margin (%)	27.50%	29.99%	31.99%	35.24%
EBITDA Margin (%)	28.11%	27.53%	30.54%	32.85%
EBIT Margin (%)	27.94%	27.40%	30.36%	32.74%
PBT Margin (%)	27.81%	27.34%	29.76%	32.74%
PAT Margin (%)	20.15%	18.63%	23.56%	24.60%
Net Profit Margin (%)	20.15%	18.63%	23.56%	24.60%
Effective tax rate (%)	27.56%	31.88%	20.83%	24.84%

Comments:
Fundamentally sounds, catalyst remains uncertain. Listing date is on 18 Jan 2011. I believe retailers will think “as long as not China stocks, not making shoes, everything will go during IPO.” No support for this statement, but it’s just purely a sentence that I regularly heard from others. Well, 18 Jan is about 2 weeks before the CNY and subscription for the IPO is closing today. For those who have sent in their subscription form, Good Luck! For those who didn’t send, we can only sit and wait for the performance of the stock.

Source: the Company's Prospectus

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.