Lian Beng Group Ltd - CIMB Research 2018-01-18: Expanding On Property Prospects

Lian Beng Group Ltd - CIMB Research 2018-01-18: Expanding On Property Prospects LIAN BENG GROUP LTD L03.SI

Lian Beng Group Ltd - Expanding On Property Prospects

  • Lian Beng’s businesses range from construction, integrated civil engineering and construction support services to property development and dormitory operations.
  • 1.9m sq ft GFA of residential landbank in Singapore via 20% stake in joint ventures.
  • S$156m in cumulative fair value gains on investment over FY13-17 (FYE May)
  • In Oct 2017, it announced plans to spin off the property development business to facilitate benchmark valuation and fund raising.
  • Trading at 0.63x 1HFY5/18 P/BV, 26% discount to RNAV.

Diversified property and construction group 

  • Lian Beng is a building construction firm with an integrated civil engineering and construction support service arm as well as property development and dormitory operations. 
  • In FY17, it generated 37%/31%/20% of revenue from construction/property development/concrete and asphalt operations, and the balance from two other businesses – engineering and leasing of construction machinery and investments.

Boosting development prospects in Singapore and China 

  • Current residential landbank in Singapore includes 20%-owned Rio Casa and 20%-owned Serangoon Ville, which total over 1.9m sq ft GFA. 
  • Lian Beng also has a 10% stake in the Gaobeidian Township Project, an area where housing prices have doubled from c.Rmb4,600 psm at end-2014 to c.Rmb9,800 psm at end-2017 (based on data from Anjuke, China’s online property listing platform).

Investments – S$156m in total fair value gains in five years 

  • Investment properties have grown from S$66m at end-FY12 to S$704m at end-FY17, yielding total cumulative fair value gains of S$156m in FY13-17. 
  • In 1Q18, the group sold off its properties at 247 and 249 Collins Street in Melbourne, Australia for A$35m (vs. acquisition cost of A$25m in Jul 2015) and plans to dispose its third Melbourne asset at 50 Franklin Street for A$90m (vs. acquisition cost of A$52m in Nov 2016).

Foray into UK property investment for income diversification 

  • Lian Beng has a 15% stake in the consortium that acquired a land site in Leeds, United Kingdom, for which approval has been obtained from the city council in Aug 2016 to develop a 192- room hotel. The hotel will be operated under the brand ‘Hampton by Hilton’ and management expects operations to commence in late-2019F, which they believe could add to investment income.

Plans for property development business spin-off 

  • Lian Beng announced in Oct 2017 that it may explore the possibility of spinning off its property development business and list it on the SGX-Catalist board, which management disclosed will provide a transparent valuation to benchmark the property development business and allow fund raising without tapping into the group’s financing.

Trading at 0.63x FY17 P/BV (NAV S$1.21 as at end Aug 2017) 

  • Net gearing stood at 0.87x as at end Nov-17. It paid FY17 DPS of 2.25 Scts, which translates into 3.0% dividend yield. 
  • Stock is trading at 0.63x 1HFY5/18 P/BV, vs its 10-year historical average of 0.65x P/BV and at a 26% discount to RNAV of S$1.03. 
  • RNAV is based on the latest market transacted prices.

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.