Wheelock Properties Singapore - Cash pile could top SGD 1bn in the next few quarters
- Wheelock Properties is one of the few developers in Singapore with a net cash position. Excluding its investment in Hotel Properties (HPL), the Group has net cash of SGD630m as at end-3Q16, comprising of cash and readily marketable securities.
- We expect more cash to pour in over the next few quarters as the Group continues to collect progress billings for its substantially sold Panorama project and generate proceeds from new sales at its already completed Ardmore 3 project. Billings from these two projects could bring in an additional SGD600m cash by end 1H17 and raise the Group's net cash position to SGD1bn, putting it in a pristine position to seek out acquisitions or land-banking opportunities.
- The capital expenditure requirements are minimal and the Group's sole project in China, in Fuyang city, has made good progress with phase 1 ready for handover in 4Q16. We believe proceeds generated from the current phase can be used to finance future phases of the project. The Group has two investment properties, Wheelock Place and Scotts Square retail, which generates a recurring rental income of ~SGD40m per annum.
- At current price of SGD1.46, we think the stock provides compelling value as: - The stock trades at more than 40% discount to its NAV of SGD2.52/share.
- Wheelock has minimal unsold inventory and with its low-cost land bank, we expect NAV to grow on additional sales;
- - Its strong balance sheet should provide flexibility and ability to capitalise on investment opportunities in a weak market;
- - Its dividend yield at 4.1% remains attractive and is well supported by its stable rental income and development profits. The Group has consistently paid out 6 cents/share in dividends; and
- - Its parent Wheelock and Co., which owns 76% of Wheelock Properties (Singapore), could privatise the company to deploy its excess cash to develop its growing portfolio in China.
- We recommend a BUY on the stock with a TP of SGD1.89, based on a 30% discount to our RNAV of SGD2.70/share.