Ho Bee Land - Maybank Kim Eng 2016-04-29: Decent yield play

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HO BEE LAND LIMITED H13.SI 

Ho Bee Land (HOBEE SP) - Decent yield play 

1Q16 results inline; Maintain BUY 

• Even though 1Q16 made up just 14% of our full year estimate, we expect earnings to pick up in the coming quarters as it books higher development profits. 
• Earnings visibility is strong as > 70% of its projects in Australia have been sold and are due for completion this year. 
• With a large portfolio of investment properties, we expect Ho Bee to maintain its DPS of 7 SGD cts this year. This translates into a decent yield of 3.2%. 
• Our BUY rating and TP of SGD2.47 remains unchanged. We derive our TP by applying consistent discounts across the sector, which are based on the outlooks for the various sub segments. 

Higher profits on London offices and Shanghai JV 

• 1Q16 net income of SGD18.5m was inline with our forecast. 
• Even though it accounted for just 14% of our full year estimate, we expect earnings to pick up in the coming quarters as it books higher development profits. 
• Contributions from newly acquired properties in London resulted in rental income rising 20% YoY to SGD37.2m. 
• This quarter’s performance was also boosted by SGD9.3m in earnings from its JV project in Shanghai. 

Expect earnings uplift from Australia projects 

• We expect earnings uplift in the coming quarters from its presold homes in Australia. 
• The company has already sold 70% of Rhapsody, its project in Gold Coast, and 85% of Pearl, its project in Melbourne, which are due for completion this year. No profits have been booked so far. 

Large recurring income base to support DPS 

• We estimate that income from its large portfolio of investment properties can support FCF of 10cts per share. Hence, we believe the company will maintain its dividend level (FY15: 5cts final; 2cts special). Accordingly, we raise our FY16E DPS to 7 SGD cts from 5 SGD cts. 
• Our revised estimate translates into a decent yield of 3.2% at the current share price. There could be further upside if management decides to distribute part of its bumper development profits or monetize any of its investment properties. 
• We reiterate Buy recommendation.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-04-29

Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 2.47 Same 2.47