Ho Bee Land Limited - Phillip Securities 2016-03-14: Attractive Valuation

Ho Bee Land Limited - Phillip Securities 2016-03-14: Attractive Valuation HO BEE LAND LIMITED H13.SI 

Ho Bee Land Limited - Attractive Valuation 

  • One of the most heavily discounted (Price/Book) locally-listed property developer. 
  • Ho Bee has gradually built up a strong portfolio with stable recurring income from offices in Singapore and London (Rental income made up 100% of income in FY14 and FY15). 
  • The Metropolis, the largest property in the portfolio by GAV, is 100% occupied with little lease expiries over next 2 years. 
  • Development properties in Singapore (Sentosa) not exposed to QC/ABSD charges. 
  • Able management team who has made shrewd strategic decisions over the years. 

How do we view this? 

  • Current bearishness likely due to negative sentiment towards Sentosa Cove residential properties as recent transactions are at depressed prices. 
  • With the office segment of the portfolio stable, and overseas development properties selling well, main uncertainty could be the high end residential segment. Recent fears of the weakening GBP/SGD in the event of a Britain exit from the European Union could also be a drag. 
  • With a stable office portfolio, and over-bearishness for Sentosa properties priced in, we think the discount is over-excessive for a company run by extremely visionary management. Comparing Ho Bee with other locally listed developers (arranged by market cap), Ho Bee is trading at one steepest discount, yet with one of the better ROE, ROA % with a reasonable gearing level of 35%. 

Investment Action 

  • We maintain our ACCUMULATE call on Ho Bee Land but with a reduced target price of S$2.27 with the change of covering analyst. 
  • Our new target price is derived using a 40% discount to RNAV, a slightly heavier discount to the post GFC, 6 year average of 33%. This is to account for the gestation time required for sentiment to turnaround for Singapore’s high end residential properties. 
  • Our model also factors in a conservative per square foot capital value of S$1500 for Turqoise and S$1700 for Seascape and Cape Royale.

Dehong Tan Phillip Securities | http://www.poems.com.sg/ 2016-03-14
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 2.27 down 2.35