Ho Bee Land Limited - Phillip Securities 2017-08-11: China Residential Sales Continue To Support Earnings

Ho Bee Land Limited - Phillip Securities 2017-08-11: China Residential Sales Continue To Support Earnings HO BEE LAND LIMITED H13.SI

Ho Bee Land Limited - China Residential Sales Continue To Support Earnings

  • Ho Bee Land's revenue within our expectation, but associate’s profits higher than expected due to higher than forecasted ASPs for Yanlord Western Garden (YWG).
  • ASPs in YWG maintain stable despite property cooling measures.
  • Weakening pound was main cause for 4.7% drop in rental income in 1H17.
  • Metropolis occupancy maintained near 100% going into second renewal cycle.
  • Maintain ACCUMULATE with higher RNAV-derived target price of S$2.98.


The positives 

  • + ASPs for China development project maintained despite cooling measures: HBL’s biggest development project in China, the JV project Yanlord Western Gardens maintained ASPs near RMB53k/sqm despite cooling measures in the country. The project is now 77% sold (vs 69% in previous quarter). Almost all units launched in the quarter are sold.
  • + Metropolis occupancy maintained near 100% going into second renewal cycle: The Metropolis (which takes up 38% of HBL total GAV) managed to maintain a near 100% occupancy going into its second rent renewal cycle since operating in 2013. Average passing rents have held stable YoY at S$7+/psf.


The negatives 

  • - Weakening pound was main cause for 4.7% drop in rental income in 1H17: Rental income dropped 4.7% YoY in 1H17, primarily due to the weakening pound vs SGD. The pound has weakened c.10% from 2Q17 against the SGD post Brexit.
  • - Slow recovery in Sentosa residential market: While we have seen improvements in transaction volumes and ASPs in the CCR region ytd, the Sentosa residential market remains weak. Rents at the Group’s 3 Sentosa condominiums meanwhile have been stable and occupancy remains in the 75%-80% region.


Outlook 

  • HBL’s local and overseas rental properties remain stable on the back of a bottoming in Singapore office rents. Their London office properties on long leases of 5-10 years which would enable it to ride out Brexit uncertainties in the short term. Stable recurring rental income should continue to support earnings. 
  • We expect the recovery in the high end market to continue into FY18 which would benefit HBL’s 3 Sentosa condominiums.


Maintain ACCUMULATE with higher RNAV-derived target price of S$2.98.

  • We maintain our ACCUMULATE call with a higher TP of S$2.98. Our discount to RNAV remains at 30% and higher target price is derived following an update to the latest ASP for the Group’s China residential project. 
  • Our estimate still incorporates a conservative S$1,500/psf selling price for the 3 Sentosa condominiums.




Dehong Tan Phillip Securities | http://www.poems.com.sg/ 2017-08-11
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 2.98 Up 2.640



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