Tuan Sing Holdings (TSH SP) - UOB Kay Hian 2018-01-29: 4Q17 S$44.9m Revaluation Gains Amidst Bullish Macro Conditions

Tuan Sing Holdings (TSH SP) - UOB Kay Hian 2018-01-29: 4Q17 S$44.9m Revaluation Gains Amidst Bullish Macro Conditions TUAN SING HOLDINGS LIMITED T24.SI

Tuan Sing Holdings (TSH SP) - 4Q17 S$44.9m Revaluation Gains Amidst Bullish Macro Conditions

  • In 4Q17, Tuan Sing Holdings (TSH) reported revaluation gains of S$44.9m, boosting y-o-y profit growth to 1942%, even as there was a weaker-than-expected blip in Australia earnings that caused core profits to miss expectations. 
  • Market bullishness surrounding residential and office recovery continues as 18 Robinson nears completion and Tuan Sing looks to launch new projects. We remain confident of Tuan Sing’s ability to ride the property upcycle. 
  • Maintain BUY with unchanged RNAV-based target price of S$0.71, implying 47.9% upside.


4Q17 results were a mixed bag.

  • For 4Q17, Tuan Sing Holdings Limited’s (TSH) earnings were a mixed bag. Positive surprises in the form of broad-based revaluation gains of S$44.9m more than offset weaker-than-expected results from hotels and investment property, boosting yoy profit growth to 1942%. 
  • While the recent reclassification of business segments does not make for easy comparison, the key misses came from hotel properties and rental income. Excluding fair value gains, core net profits declined 50% yoy to S$5.1m on the back of 3.8% drop in revenue to S$98.0m. However, the sizeable revaluation gains from 18 Robinson ahead of a bumper developer’s profit to be recognised in 2018 came as a positive surprise.

Australian hotel and non-hotel earnings below estimates.

  • Buffeted by low commodity prices and an associated decline in corporate demand, Grand Hyatt Melbourne and Hyatt Regency Perth registered a combined 1% drop in RevPAR despite higher occupancy rates. 
  • Full year net income reduced by 4% to A$25.1m from A$26.2m. The wide-ranging impact of low commodity prices had also impacted demand for commercial space and retail consumption, leading to weaker-than-expected non-hotel earnings.

Broad-based net fair value gain of S$78.3m came in above expectations.

  • In 4Q17, Tuan Sing’s income statement recognised S$44.5m net asset revaluation gain, of which S$21.9m came from 18 Robinson with investment properties and non-hotel properties making up the rest. It had also recognised a further S$33.8m revaluation gain in its comprehensive income statement in relation to Australian hotels. 
  • The sizeable revaluation gain arising from 18 Robinson came as a surprise ahead of the recognition of a bumper developer’s profit in 2018. We note that the broad-based uplift in asset value also points toward rising earnings potential of other investment properties and Australian hotels. As a result, book value has now increased to S$0.83/share (+ S$0.05/share).


Bullishness surrounding residential and office recovery.

  • Savills had noted that residential recovery has legs and will likely be fuelled by pent-up demand. At the same time, Cushman & Wakefield noted that Grade-A CBD rents rose 6.6% despite some 2.2m sf of office space entering the market. 
  • This pick-up in lease rates will continue as manufacturing growth spills over to services, creating demand for office space. This bodes well for Tuan Sing’s important commercial investment project 18 Robinson (26.5% of total property portfolio value)

Positive revaluation of 18 Robinson tracking expectations.

  • With Robinson Tower nearing completion, we expect a bumper developer profits to be recognised in 2018. We also expect this important commercial project to contribute steady recurring income stream from 2019 onwards, boosting core profits.

Property developments and other investments also look positive.

  • In view of the strong recovery of Singapore’s residential property market, Tuan Sing also expect to launch its remaining two projects in Kandis Walk and Jalan Remaja with 130 and 100 units respectively. 
  • Sime Darby Centre’s repositioning offers further revaluation upside and recurring income as the area it is located in gears towards being a medical hub. 
  • The AEI at Hyatt Centre Perth and proposed development of the adjacent Lot 11 also pose further revaluation and recurring income upside.


Roll-over earnings expectations for 2020 with no change to earnings forecasts in 2018-19.

  • We roll over our earnings estimate for 2020 with a conservative 3.7% growth while maintaining 2018-19 net profits attributable of S$27.2m and S$46.6m respectively (excluding fair value gains and associated tax provisions).
  • We think the weaker-than-expected Australian hotel and non-hotel performance are a short-term blip and re-iterate our expectations that 2017 is the bottom for Perth. With Perth on the cusp of a recovery and strong fundamentals supporting Melbourne, we maintain confident over Tuan Sing’s Australian properties’ performance. Leasing income from 18 Robinson and Sime Darby Centre will also support earnings in the medium term.


Maintain BUY with unchanged SOTP-based target price of S$0.71, implying 47.9% upside.

  • At current prices, Tuan Sing is trading at fire-sale levels of 57.8% of book value. We see RNAV expansion and yield pick-up upon completion of 18 Robinson’s redevelopment with sale of non-core assets and property inventory unlocking value. 
  • The recent positive revaluation of Tuan Sing’s property portfolio further highlights the attractiveness of Tuan Sing’s property portfolio of majority freehold/ 999-year leasehold tenure which provides stability to its NAV over the medium term.


  • Sale of non-core assets.
  • Completion of 18 Robinson redevelopment and potential spin-off.
  • Redevelopment of Sime Darby.

Edison Chen UOB Kay Hian | Yeo Hai Wei UOB Kay Hian | http://research.uobkayhian.com/ 2018-01-29
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.710 Same 0.710