Hatten Land Ltd - CIMB Research 2017-08-17: 4Q17 Strong Operating Performance

Hatten Land Ltd - CIMB Research 2017-08-17: 4Q17 Strong Operating Performance HATTEN LAND LIMITED PH0.SI

Hatten Land Ltd - 4Q17 Strong Operating Performance

  • Hatten Land's 4Q/FY17 core EPS was broadly in line, accounting for 57%/95% of our FY6/17F projections.
  • FY17 profit uplift came from Hatten City P2 and Harbour City.
  • Launch of Satori, Melaka’s first wellness themed project, in 4Q17 garnered strong interest.
  • Improved balance sheet provides capacity to reinvest, in our view.
  • Maintain Add with unchanged TP of S$0.38, based on a 45% discount to RNAV.

4QFY17 results highlights 

  • Hatten Land (Hatten) reported 4QFY17 net profit of RM59.7m, +200% yoy, on a 24% increase in revenue to RM130m, thanks to better operating performance. 
  • However, FY17 net profit of RM8.7m was lower than FY16 due to one-off items such as reverse takeover offer expenses of RM82.2m. Excluding this, we estimate FY17 bottomline would have been RM91m, +32.6% yoy. 
  • The group has proposed final DPS of 0.05 Scts for FY17, translating into a yield of c.0.3%.

Boosted by contributions from Hatten City P2 and Harbour City 

  • The better FY17 earnings performance came from progressive billings and higher sales at Hatten City P2 and Harbour City development. The Imperio Mall is 60% taken up, while Imperio Residence is 56% sold. 
  • Meanwhile, Harbour City Suites and Harbour City Resort saw further sales growth of 14% and 25%, respectively, bringing take-up rate to 95% and 49%. 
  • As at Jun 2017, Hatten had remaining unbilled sales of RM662m.

Launch of Satori well received 

  • The group launched the Satori mixed development in Jul this year. This is Melaka’s first wellness-themed integrated project and comprises Satori Suites (139,667 sq ft of saleable area), Satori Residences (81,872 sq ft) and Satori commercial (85,520 sq ft).
  • Although no details were given, we understand that the initial offering of the hotel suites (Satori Suites) garnered a strong booking rate. We expect this development to have a GDV of RM300m, which would extend the group’s forward income visibility.

Balance sheet capacity to tap into inorganic growth opportunities 

  • Balance sheet has improved, with a net debt-to-equity ratio of 1.6x at end-FY17F (vs 2.8x at end-FY16). This puts the group in a strong position to tap into growth opportunities, including the acquisition of land under its right-of-first-refusal pipeline from its Sponsor, as well as potentially venture into other parts of Malaysia or overseas.

Maintain Add 

  • We raise FY18F EPS by 7.5% and lower FY19F EPS by 8.2% to adjust for results and introduce FY20F projections. 
  • We continue to be positive about the Melaka property market, thanks to robust tourist flows and numerous mega infrastructure projects, planned or under development, like KL-Singapore High Speed Rail and Melaka Gateway. These developments are likely to transform the landscape of Melaka and boost its attraction as a holiday and investment destination. 
  • Maintain Add with a TP of S$0.38.

Downside risk 

  • Downside risks to our call are a slowdown in tourist arrivals to Malaysia, namely Melaka, or a delay in the development of the planned infrastructure projects, which could temper the attractiveness of Melaka as an investment destination.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-08-17
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 0.380 Same 0.380