Cogent Holdings Ltd - Phillip Securities 2017-09-14: Expanding Property Management Capability

Cogent Holdings Ltd - Phillip Securities 2017-09-14: Expanding Property Management Capability COGENT HOLDINGS LIMITED KJ9.SI

Cogent Holdings Ltd - Expanding Property Management Capability

  • Award of three-year lease to operate a student hostel at 362 Holland Road.
  • Adding breadth to experience in property management.
  • No timeline provided on commencement of operations.

What Is The News?

  • Cogent Holdings Ltd (Cogent) has been awarded a three-year lease (extendable by another three-years) by the Singapore Land Authority to operate a student hostel at 362 Holland Road. 
  • The property comprises two blocks of one-storey buildings with a gross floor area of about 583.4 sqm. The land area is about 2,318 sqm. The property is able to house up to 60 students. 
  • The property will be managed by Cogent's wholly-owned subsidiary, Cogent Realty Capital Pte Ltd.

How Do We View This?

Builds upon existing property management capability into burgeoning student accommodation market 

  • Cogent's property management arm currently operates a family lifestyle destination, The Grandstand, at Bukit Timah. This student hostel lease is an opportunity for Cogent to build upon its existing property management capability. 
  • The prospects for student accommodation is less sensitive to economic cycles, as compared to the rest of Cogent's business segments.

Catchment of educational institutions nearby 

  • Nexus International School, Tanglin Trust School, Singapore Polytechnic, INSEAD, the National University of Singapore and the Singapore Institute of Technology are within the vicinity of the student hostel.

Not a material contribution to Cogent's earnings 

  • Owing to the size of the property, the operations would be small relative to the rest of Cogent's operations. 
  • We also note here that Cogent had put in the highest bid of the lease and there were four other bidders. Cogent had a winning bid of $32,362 /month and piped the second-highest bid by S$862 /month for the site.

Maintain Buy; unchanged target price of S$1.12 

  • The property is currently vacant and no details have been disclosed on start-up capital expenditures or other operational details such as when it will commence operations. We do not make any changes to our forecast for now.
  • Our target price represents an implied 16.5x FY17e P/E multiple, compared to the Straits Times Index forward 12-months P/E multiple of 14.7x.

Richard Leow CFTe Phillip Securities | 2017-09-14
Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 1.120 Same 1.120