Heeton Ltd - CIMB Research 2018-01-18: Strong Reinvestment Activities

Heeton Ltd - CIMB Research 2018-01-18: Strong Reinvestment Activities HEETON HOLDINGS LIMITED 5DP.SI

Heeton Ltd - Strong Reinvestment Activities

  • Heeton is a niche developer with a sizeable hotel portfolio.
  • Expanding Singapore landbank to ride on the country's property upcycle.
  • Strong recurrent income in FY16 from commercial and hotel assets.
  • Trading at a historical 0.50x Sep 2017 P/BV.

A niche developer with a sizeable hotel portfolio 

  • Heeton is a property developer and investor with assets in Singapore and overseas. In Singapore, it has built a niche for itself in developing boutique projects, while its investment property and hotel portfolio comprises properties located in Singapore, the UK, Japan and Thailand. 
  • In FY16, 63% of its revenue was derived from property development, 20% from rental and 15% from its hotel operations. 

Expanded Singapore residential landbank via stakes in two sites 

  • In addition to progressive recognition of profits from High Park Residences, Heeton recently expanded its Singapore landbank by acquiring stakes in the Serangoon Ville en bloc and Woodleigh Lane plots, with combined total gross floor area (GFA) of 1.46m sq ft.

Monetised The Woodgrove at significantly-higher value 

  • Heeton has an attributable 235,538 sq ft of commercial NLA in Singapore, which generated S$13.3m of recurrent rental revenue in FY16. The group recently monetised The Woodgrove at a selling price of S$56m, 79% above the FY16 fair value.

Significant hotel portfolio 

  • Heeton has a portfolio of eight operating hotels in Thailand, the UK and Japan and another three under development. 
  • Its most recent purchase is a 50% stake in the iconic Dry Bar in Manchester City, which has obtained planning permission to convert the upper floors of an existing building into a hotel, to be managed by Heeton’s hospitality division. The property has an internal GFA of 20,713 sq ft.

Trading at a low 0.49x P/BV 

  • Heeton’s net debt to equity stood at 0.72x as at end-Sep 2017. It is trading at 0.50x Sep 2017 P/BV and at a 60% discount to RNAV of S$1.48, premised on transacted market values of projects in the vicinity. 
  • FY16 DPS of 0.6 Scts translates into dividend yield of 1%.

Target Price: N/A

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2018-01-18
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* This Eyes On the Ground report represents a preliminary assessment of the subject company, and does not represent initiation into CIMB's coverage universe. It does not carry investment ratings and CIMB does not commit to regular updates on an ongoing basis.