Ho Bee Land - RHB Invest 2015-12-02: Fortune Favours The Brave

Ho Bee Land - RHB Invest 2015-12-02: Fortune Favours The Brave HO BEE LAND LIMITED H13.SI 

Ho Bee Land (HOBEE SP) - Fortune Favours The Brave 

  • We like Ho Bee for the steady execution of its strategy to grow recurring income. 
  • BUY with a SGD2.57 TP (29% upside). 
  • The group has now built up a steady rental income of c.SGD130m, and would benefit from a recovery in the high-end residential market via its remaining inventory in Sentosa. 
  • Management remains on the lookout to landbank opportunistically in Singapore, and has a strong balance sheet to expand with net gearing at 0.5x. 

 Steady recurring income stream from office properties in Singapore and London. 

  • In the past two years, Ho Bee Land (Ho Bee) has acquired five prime office properties in London at a total cost of c.£500m at net yield of ~5%. This, coupled with its fully-leased 1.1m sq ft The Metropolis in Singapore, is expected to generate rental revenue of some SGD130m per annum. 
  • With provisions for rental step-up for its London properties and conservative valuation metrics (S$1,450 psf) for The Metropolis, we see upside to its portfolio valuation of SGD2.6bn. 

 First mover in Sentosa. 

  • Ho Bee was the earliest to enter the Sentosa market and develop properties there. This was done at a time when many mainstream developers were still cautious of the sustainability of developing real estate on the resort island and preferred to stay on the sidelines. 
  • Clinching eight plots of land there, Ho Bee went on to launch its projects and rake in more than SGD800m of profits. The market is now subdued and it retains some exposure there with unsold units at Seascape and Cape Royale. These units are currently being rented out while it awaits a turn in the cycle. 
  • Meanwhile, its residential projects in Australia and China (via a joint venture (JV) with Yanlord Land (YLLG SP, NR)) have sold well and should provide it with additional profit streams upon completion in 1-2 years’ time. 

 Solid track record, unjustified NAV discount. 

  • Ho Bee has the best track record among its real estate peers, with its NAV/share compounding at 18% pa over the last decade, and stock price compounding at 19% pa over the same period. 
  • We like the stock for management’s execution ability, steadily growing recurring income base and attractive valuation. 
  • Our TP of SGD2.57 is set at a 35% discount to its NAV.

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2015-12-02
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.57 Same 2.57