RHB Securities 2015-08-17: SingHaiYi Group -Still On a Diversification Path. Maintain BUY.

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SINGHAIYI GROUP LTD 5H0.SI

Still On a Diversification Path 

• 1QFY16 (Mar) results were in line. 
• BUY, with a lower RNAV-derived TP of SGD0.16 (from SGD0.18, 22% upside). Its 1QFY16 special dividend of 0.2cts was below our 0.4-cent estimate, suggesting management may be conserving funds for future projects. 
• With persistent headwinds on the local front, we are eager to see more acquisitions in the US and other regions that may heighten its earnings resilience and diversification beyond the remaining two EC projects in Singapore. 

 1QFY16 (Mar) results in line. 

• 1Q16 PATMI registered strong performance mainly due to contributions from the Pasir Ris One DBSS project which was awarded its Temporary Occupation Permit (TOP) in May. Although the project was 93%-sold, 87% of the project was recognised in 1QFY16 and the remaining 6% of the project is to be recognised when the buyers’ eligibility tests are met. 
• Singhaiyi’s gross profit margin declined by 47.5/42.0 ppt QoQ/YoY to 12.9% because of Pasir One project which had a lower profit margin. There was also a sale of financial assets, pertaining to a portfolio of fixed income funds which primarily focus on US markets last quarter, which bumped up cash flow by SGD19.8m. 

 Two more ECs to go. 

• CityLife@Tampines executive condominium (EC) (100% sold), in which SingHaiyi has a 24.5% stake, is expected to receive its TOP in 1Q16. 
• We forecast a PBT of SGD26.7m, which will be recognised in its entirety upon receiving the TOP. In Jul 2015, SingHaiyi also launched The Vales EC at Anchorvale Crescent, which is expected to get its TOP in 1H17. 
• The average selling price is SGD787psf from the 73 transactions registered with the Urban Redevelopment Authority as of 19 Jul, and we expect a revenue contribution of SGD351m in FY18. 

 More overseas exposure to lift earnings. 

• SingHaiyi has 24% and 4% RNAV exposure to the US and Malaysia respectively. With the slowdown in the domestic front, we cut our FY16F-18F core PATMI by 3.8-7.6%. 
• SingHaiyi announced a special DPS of 0.2cts, which was below our estimate of 0.4cts, suggesting management may be conserving funds for future projects. 
• We await more accretive acquisitions from overseas to drive future earnings. 
• Maintain BUY with a lower RNAV-derived TP of SGD0.16 (22% upside).

Ong Kian Lin | Ivan Looi http://www.rhbgroub.com/ RHB Securities 2015-08-17

BUY Maintain BUY 0.16 Down 0.18