Heeton Holdings - RHB Invest 2017-05-22: Quiet Beneficiary Of Gaobeidian Goldmine

Heeton Holdings - RHB Invest 2017-05-22: Quiet Beneficiary Of Gaobeidian Goldmine HEETON HOLDINGS LIMITED 5DP.SI

Heeton Holdings - Quiet Beneficiary Of Gaobeidian Goldmine

  • We believe Heeton Holdings is one of the few home-grown boutique developers that is poised to benefit from the recent pickup in residential property transactions. 
  • The Group has completed a string of developments recently, from joint venture projects such as KAP and KAP Residences, 121 Collection on Whitley and its wholly owned Onze@Tanjong Pagar. 
  • The developer will also be completing several other projects over the course of 2017, such as Westwoods Residences, its 50:50 EC development with Koh Brothers (86% sold), Rezi3Two and Trio. 
  • The Group is also recognising profits progressively on its joint venture project with Chip Eng Seng and KSH, namely the 1390-unit High Park Residences (20% stake), which has been fully sold. These project completions will bring in a steady stream of cash and enable the group to capitalise on the improving market sentiments to clear its remaining inventory.
  • Heeton has also cleared the qualifying certificate overhang, having disposed of its prime project iLiv@Grange via a sale of company shares in the development in September 2016, and it is currently in the midst of completing the disposal of remaining units in the Lumos, another luxury development at Leonie Hill. Post this sale, the Group will have a more liquid balance sheet to pursue expansion of its hospitality portfolio. Heeton also boasts a SGD300m investment property portfolio, which include Tampines Mart, Woodgrove and a 50% stake in Sun Plaza, providing the group with a source of recurring rental income and re-development opportunities in case of Woodgrove and Tampines Mart.
  • The last icing on the cake is its 7.5% stake in the Gaobeidian project in Hebei province. Spearheaded by KSH and Oxley Holdings, the consortium in this 533-hectare project has landed on a goldmine as Beijing has designated Xiongan New Area, about 100km south of Beijing, as the third special economic zone. Property prices in Hebei’s nearby areas has skyrocketed from CNY4,000 psm to as high as CNY18,000 psm. 
  • We believe Gaobeidian project could be a key beneficiary given its proximity to the new SEZ and its direct link to the high speed rail to Beijing. Our ballpark estimate of Heeton’s share of profits from the 1.6m sqm residential component is SGD96m, assuming a net profit of CNY4,000 psm after factoring in total development cost and associated taxes.
  • At SGD0.45, Heeton is trading at a steep discount of 58% to its NAV of SGD1.06. However, just factoring in its share of profits from High Park Residences (~SGD30m) and Gaobeidian (SGD96m) will raise its NAV by another SGD0.39/share to SGD1.45. Given the large discount to NAV versus its peers, we reckon that the stock is undervalued. 
  • While the large cap peers are trading at 20% discount to RNAV, Heeton Holdings' shares could be worth SGD0.72 per share assuming a 50% discount to its RNAV.

Goh Han Peng RHB Invest | http://www.rhbinvest.com.sg/ 2017-05-22
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