Keong Hong Holdings Ltd - CIMB Research 2018-01-18: Expanding Overseas Investments

Keong Hong Holdings Ltd - CIMB Research 2018-01-18: Expanding Overseas Investments KEONG HONG HOLDINGS LIMITED 5TT.SI

Keong Hong Holdings Ltd - Expanding Overseas Investments

  • Involved in diversified businesses ranging from construction and hotel investment to property development.
  • Development pipeline includes Parc Life and Seaside Residences projects, which had 79% and 65% of units available sold, respectively, as at end FY17.
  • Hotel assets in Singapore and Maldives could add to recurrent income base in future.
  • Entrenching itself deeper in the property investment market in Japan with second acquisition in Sep 2017.
  • The stock is now trading at 32% discount to RNAV.

Construction, property & hotel investment and development firm 

  • Keong Hong’s (KHH) principal activities are provision of construction services, property & hotel development and investment projects in Singapore, Japan and Maldives
  • In FY17, 99.6% of its revenue was derived from buildings and construction.

Residential projects in the pipeline already over 65% sold 

  • Current development projects include 20%-owned Parc Life and 20%-owned Seaside Residences condo projects, which were 79% and 65% sold (at average selling prices of S$770psf and S$1,700psf, respectively) as at end Sep 2017. 
  • The firm also served as the main contractor for these two JV projects, which are expected to obtained Temporary Occupancy Permit (TOP) in 2018F for Parc Life and 2020F for Seaside Residences.

Increasing hotel investment to build up recurrent income stream 

  • Keong Hong Holdings (KHH) owns a 20% stake in both Holiday Inn Express Katong and Hotel Indigo Katong, which started to contribute earnings since opening in mid-2016. 
  • In the Maldives, Keong Hong invested in two hotel assets and undertook their construction. Maldives Koodoo Hotel was opened in Sep 2017 and management expects the other 120-villa Maamutaa Resort to be opened in 2019F. These properties are likely to add to Keong Hong’s recurrent income.

Property investment in Japan provides additional income base 

  • The group acquired its second commercial building located in Osaka for JPY950m in Sep 2017, adding to the first building it acquired for JPY938m in Feb 2016. These properties are 100% tenanted, mainly occupied by offices, and provide an alternative income stream for the group.

Trading at 0.75x P/BV and 29% discount to RNAV 

  • As at end FY17, Keong Hong’s net gearing ratio stood at 0.11x. The group proposed a final DPS of 1.75 Scts, which would bring total DPS payout for FY17 to 2.0 Scts. This translate into a 3.2% dividend yield. 
  • The stock is currently trading at 0.76x P/BV (book NAV of S$0.83) and at a 32% discount to RNAV of S$0.92.

NOT Rated
Target Price: N/A

Colin TAN CIMB Research | 2018-01-18
CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998

* 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.