Ho Bee Land - Maybank Kim Eng 2016-01-13: Skewed Risk-Reward

Ho Bee Land - Maybank Kim Eng 2016-01-13: Skewed Risk-Reward HO BEE LAND LIMITED H13.SI 

Ho Bee Land (HOBEE SP) - Skewed Risk-Reward 

Maintain BUY with new SGD2.84 TP 

  • We apply varying discount rates to Ho Bee’s sub-segments in our RNAV, which dips from SGD4.71 to SGD4.28. This lowers our TP to SGD2.84 from SGD2.90
  • We cut ASPs for its Sentosa homes to SGD1,600 psf from SGD2,000 in view of unrelenting market weakness. 
  • Ho Bee’s RNAV is dominated by office assets in Singapore (40%) and the UK (31%), which should provide strong valuation support. 
  • Our TP implies 0.7x P/BV, -0.2SD from its 10-year average. 
  • Expect catalysts from a rebound in home sales in Sentosa and possible monetisation of its investment properties. 

Not too concerned with Singapore office exposure 

  • Ho Bee has the largest exposure to Singapore’s office sector among our property stocks. However, we are unfazed as its The Metropolis is not in the CBD, where a supply glut is anticipated. 
  • Furthermore, it could benefit from office decentralisation with its more attractive rents of SGD6+psf vs SGD10+ for prime space. 
  • The Metropolis may also profit from the redevelopment of Jurong as the next commercial hub, as it is located only 3 MRT stations away. 

Conservative valuation of Sentosa assets 

  • We cut ASPs for its unsold inventory in Sentosa to SGD1,600psf from SGD2,000 to reflect unabated market weakness. 
  • Valuation of these assets is iffy due to a dearth of transactions and wide range of asking prices. But as projects in Sentosa are not subject to QC deadlines, they arguably have lower risks. 

Skewed risk-reward trade-off 

  • We continue to see deep value in the stock. 
  • Our conservative valuation of its investment properties already implies SGD4.03 per share
  • Not only would these assets provide strong valuation support but the market appears to be not assigning any value to its development projects.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-01-13
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.84 Down 2.90