KSH Holdings (KSHH SP) - UOB Kay Hian 2017-11-06: Target Price Surpassed; Take Profit

KSH HOLDINGS LIMITED ER0.SI

KSH Holdings (KSHH SP) - Target Price Surpassed; Take Profit

KSH’s current share price of S$0.89 has surpassed our target price of S$0.87 by 2.2%, representing total returns of 111% since our initiation.
Singapore’s property market is heating up but construction remains weak and KSH has no projects ready for launch to take advantage of.

Upside catalysts for Gaobeidian also appear remote. Upside has been priced in while downside risks remain. We advise investors to take profit and downgrade to HOLD with an unchanged SOTP target price of S$0.87.

With the exuberant property market, KSH Holdings’ (KSH) share price has reached and surpassed our target price of S$0.87.
We first initiated coverage on KSH when it was at S$0.55 and the current price represents total returns of 111% (including dividends and bonus shares). We now advise investors to take profit as we believe the upside is priced in while downside risks remain.

While Singapore’s property market is getting hot with signs of a rebound, we cannot say the same for construction. Channel checks indicate that there have been issues of cost overruns plaguing the construction sector.
While KSH has been trying to build its landbank (recent acquisitions include a 27.5k sqm purchase by a 37.5%-owned JV for S$499m), it does not have any projects for launch in the near term. As such, we believe new sales will only be seen further down the road but downside risks are already present for KSH in this scenario.

There have been no updates on KSH’s new plans for Gaobeidian. While there are no negative signs, any further delay would result in a drop in the relevant RNAV. Furthermore, prices for Gaobeidian have mellowed with exuberance about the new Special Economic Zone having died down (Fang.com shows that secondhand prices have dropped to about Rmb10,387/sqm in Oct 17 compared to the high of Rmb11,694/sqm in Aug 17).
While the Gaobeidian project promises great rewards, uncertainty is still present and upside catalysts appear remote.

As the share price has surpassed our target price with upside catalysts remote and downside risks present, we downgrade to HOLD with our SOTP target price unchanged and advise investors to take profit.
Entry price is S$0.785.

Edison Chen UOB Kay Hian | http://research.uobkayhian.com/ 2017-11-06

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