HATTEN LAND (HATT SP) - UOB Kay Hian 2017-05-16: Safe Harbour In FY18

HATTEN LAND (HATT SP) - UOB Kay Hian 2017-05-16: Safe Harbour In FY18 HATTEN LAND LIMITED PH0.SI

HATTEN LAND (HATT SP) - Safe Harbour In FY18

  • We attended Hatten Land’s post-results analyst briefing. 
  • Income contribution in FY18 is likely to be bolstered by the completion of three development projects by 1HFY18. 
  • Management is keen to venture beyond Malacca (Kuala Lumpur).



VALUATION


Maintain BUY with an unchanged SOTP-based target price of S$0.43. 

  • Our target price incorporates a 30% discount to our RNAV of S$0.47 for existing projects and a significantly higher discount of 80% for land under acquisition agreements.
  • We lower our FY17 earnings forecast by 12.9% but raise our FY18 earnings forecast by 6.9%, mainly through deferring earnings recognition from commercial projects to later years.


FINANCIAL HIGHLIGHTS


Results below expectations

  • Results below expectations, with core 9MFY17 net profit of RM$36.8m (excluding one-off expenses of RM$87.8m (RTO costs and professional fees) making up 66% of our FY17 core profit estimate. 
  • The results fell short of expectations due to timing differences in earnings recognition of Hatten Land's development projects.

Income contributions in FY18 will likely be bolstered

  • Income contributions in FY18 will likely be bolstered by the 1HFY18 completion of projects like Imperio Mall (60% sold), Imperio Residence (51% sold) and Vedro (65% sold). 
  • The company also entered into the proposed acquisitions of two pipeline land plots from parent company Hatten Group. Management intends to launch both projects (Thea Wellness and MICC) by 2HFY18, with collective GDV estimated at RM1.2b.

Potential diversification into states beyond Malacca. 

  • Management highlighted that it would be looking to acquire a land plot within Kuala Lumpur (city area) from third parties. 
  • We understand that the potential target should be ready for development upon acquisition, to facilitate a possible launch within FY18.




Singapore Research Team UOB Kay Hian | http://research.uobkayhian.com/ 2017-05-16
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.430 Same 0.430



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