Maybank Kim Eng 2015-08-10: Ho Bee Land - 2Q15 Results. Higher TP on RNAV Uplift. Maintain BUY.

HO BEE LAND LIMITED H13.SI

Higher TP on RNAV Uplift 

  • Results humdrum. Improved EPS on higher rents. Growing commercial exposure. 
  • Raise RNAV by 12% for higher capital value for London office assets and GBP strength. Partially offset by weaker AUD. Market price implies zero value to its Sentosa homes. 
  • Maintain BUY with higher SGD3.05 TP, still at 35% discount to RNAV of SGD4.71. 

Results humdrum; improved EPS on higher rents 


  • 2Q15 net income of SGD16.7m (+36.9% YoY), broadly inline. 
  • Higher rental contribution from its commercial assets was the key highlight for the quarter. 
  • Net gearing remained healthy with BVPS unchanged at SGD3.90. 
  • Over the past month, the company announced the acquisition of two London properties for a total of GBP190m, which brings its total investments to GBP0.5b over the past two years. 
  • With London office at 30% of its GAV and Singapore office (The Metropolis) another 40%, we believe the company is evolving to be a stable commercial proxy. 

Market assigned zero value to its Sentosa homes? 


  • At current stock price of SGD2.02, we believe the market has assigned zero value to its Sentosa homes. 
  • Liquidating its portfolio of office assets at our estimated market value of SGD3b to pay offSGD1.1b of debt implies an equity value of SGD1.9b (SGD2.78/shr). 
  • Even if we mark down another SGD544m for other off-balance sheet liabilities, the implied value of SGD1.3b (SGD1.97/shr) remains not far from the stock price. 

Higher TP on 12% uplift to RNAV 


  • We raise our RNAV by 12% to SGD4.71 (from SGD4.23) to incorporate higher capital values for its London office assets and a stronger GBP. This is partially offset by a weaker AUD. 
  • With over 70% of GAV from stable income producing assets, we deem the steep 57% RNAV discount excessive. 
  • Maintain BUY with SGD3.05 TP.


Derrick Heng CFA | http://www.maybank-ke.com.sg/ Maybank KE 2015-08-10
BUY Maintain BUY 3.05 UP NA


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