Bukit Sembawang Estates - DBS Research 2017-03-02: Landlord King of Singapore

Bukit Sembawang Estates - DBS Vickers 2017-03-02: Landlord King of Singapore BUKIT SEMBAWANG ESTATES LTD B61.SI

Bukit Sembawang Estates - Landlord King of Singapore

  • One of the few with substantial freehold/999-year lease landbank in Singapore.
  • Flushed with cash; high dividend yield.
  • Potential takeover target for investors looking to gain access to land in Singapore.

The Business 

Largest owner of land in Singapore. 

  • Bukit Sembawang is a property developer that owns more than 2.8m square feet of substantially freehold / 999-year leasehold land in Singapore, of which c.75% is undeveloped raw land. 
  • In addition, the group’s completed / close to completion high-end residential projects (85-unit Paterson Collection and 250-unit project at St Thomas Walk) in the core central region should do well if launched for sale given the positive sentiment in the luxury residential market currently.

Flushed with cash; high dividend yield. 

  • As at Dec16, the group has a net cash position S$383m (S$1.48/share), implying that close to one-third of its market cap is backed by cash. 
  • In the past two years, it has declared an annual dividend of 33 Scents (29 Scents special dividend), if sustained, implies a dividend yield of 7%.

Potential takeover target. 

  • Its major shareholder, Lee family of Lee Rubber / OCBC, owns a 44% stake which could be for sale given the family has been in a ‘divestment’ mode in the past few years (OCBC’s non-core assets such as F&N & potentially United Engineers and Outram Rd shop houses). 
  • Given ample liquidity and recent M&A deals in Singapore, we believe that Bukit Sembawang is an attractive prospect for any investor/developer who wants access to land-bank in Singapore.

The Stock 

Trades at significant discount to market price. 

  • Despite trading at 1.0x P/NAV, we estimate that the group’s landbank comes free at Bukit Sembawang’s current share price. Assuming the price of undeveloped land is marked to market prices, we estimate Bukit Sembawang is worth S$7.55/share. 
  • If we factor in its full development potential from its undeveloped landbank (excluding any potential uplift in plot ratio), RNAV could rise to S$10.35/share.

Low liquidity, execution risks in the absence of potential takeover. 

  • The absence of a potential takeover and long gestation period to realise its full value of its land-bank.

Return *: 2 
Risk: Moderate 
Potential Target 12-mth* : S$ 7.55 (56% upside)

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-03-02
DBS Vickers SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998