Ho Bee Land - Maybank Kim Eng 2016-03-09: Close The Gap

Ho Bee Land - Maybank Kim Eng 2016-03-09: Close The Gap HO BEE LAND LIMITED H13.SI 

Ho Bee Land (HOBEE SP) - Close The Gap 

Maintain BUY; SGD2.33 TP 

  • We raise EPS by 13% to capture its lower cost base after the recent impairment of Cape Royale. 
  • Potential sales of properties could close its trading discount to RNAV, in our view. 
  • Ho Bee may also announce special DPS to share the gains. 
  • Completion of its Australia residential projects should anchor its sales this year. 
  • Maintain BUY & SGD2.33 TP.

Potential Asset Sales 

  • We continue to see strong valuation support from its portfolio of office assets in Singapore (41%) and the UK (29%). 
  • We believe that asset sales will unlock value and close its RNAV gap. The company may also share gains from any asset sales with a special DPS that could bring upside to our 5 Sct DPS forecast. 

Completion of Australia Projects 

  • The completion of its residential projects in Australia, The Pearl in Melbourne and Rhapsody in Gold Coast, is expected to underpin sales this year. 
  • We only expect home sales in Singapore from 2017, given weak sentiment on Sentosa. We believe our SGD1,600 psf valuation of its Sentosa assets is conservative. 

Privatisation Remains a Possibility 

  • Its major shareholder continues to amass shares in Ho Bee, which is trading at a steep discount to our RNAV. 
  • Mr. Chua Thian Poh’s last reported interest of 490.6m shares is 3.5m higher than his 487.1m in Mar 2015. This represents 73.6% of Ho Bee’s 666.2m outstanding shares, excluding treasury ones. 
  • While there is little time pressure to make a privatisation move, we believe an offer for the remaining 175.6m shares remains possible, given the mismatch between Ho Bee’s stock value and the value of its underlying properties. 

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-03-09
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.33 Same 2.33