Ho Bee Land - Maybank Kim Eng 2016-02-25: Strong valuation support from office assets

Ho Bee Land - Maybank Kim Eng 2016-02-25: Strong valuation support from office assets HO BEE LAND LIMITED H13.SI 

Ho Bee Land (HOBEE SP) - Strong valuation support from office assets 

Maintain BUY with SGD2.33 TP 

  • Maintain BUY on Ho Bee following the 4Q15 results. 
  • Our RNAV-based TP of SGD2.33 has valuation support from its portfolio of office assets in Singapore (40%) and the UK (31%), which provide strong valuation support. Monetisation of these assets could unlock value and narrow its valuation discount. 
  • Our RNAV had already built in a conservative value for its Sentosa assets. 

FY15 in line; DPS raised 

  • Ho Bee reported FY15 net income of SGD242m (-23% YoY). 
  • The positive variance was driven by fair value gains of SGD186.4m on its office properties in Singapore and UK. 
  • The company also recorded SGD17m in contributions from associates due to profit recognition from its joint venture project in Shanghai and a SGD21.4m write-back on construction cost for The Metropolis. 
  • These positive variances were offset by a SGD34.7m impairment charge on its 35% stake in Cape Royale. 
  • Overall, we deem the underlying performance in line. 
  • The company proposed a higher DPS for the year of 7 SGD cts (Final: 5cts; Special: 2cts) from 5 SGD cts last year. This translates to a yield of 3.7%. 

Sentosa properties marked down 

  • The company took an impairment charge of SGD34.7m for its 35% stake in Cape Royale based on latest valuation by Savills of SGD1,363m (SGD1,950 psf) for the project. 
  • While negative, our RNAV valuation had already built in a conservative valuation of SGD1,600 psf for its entire Sentosa portfolio. 
  • No impairment is required for the other two projects in Sentosa, Turquoise and Seascape, as their costs are much lower. 

Possible sale of UK office could unlock value 

  • The company put up Rose Court, one of its UK office properties, for sale recently. This property’s latest valuation of GBP92.5m already reflects a 38% appreciation from the GBP67.2m price it paid. 

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-02-25
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.33 Down 2.84