Ho Bee Land Limited - Phillip Securities 2018-03-02: Possible Relaunch Of Sentosa Properties As Market Recovers

Ho Bee Land Limited - Phillip Securities 2018-03-02: Possible Relaunch Of Sentosa Properties As Market Recovers HO BEE LAND LIMITED H13.SI

Ho Bee Land Limited - Possible Relaunch Of Sentosa Properties As Market Recovers

  • Ho Bee Land (HBL)'s FY17 adjusted net earnings exceeded our expectations by 30% due to higher associates’ earnings from residential sales recognition in Shanghai.
  • Stable recurring income portfolio continues to buffer earnings in absence of development income.
  • Possibility of relaunch for Sentosa properties as high-end properties market recovers.
  • Maintain ACCUMULATE with unchanged RNAV-derived target price of S$2.98.



The Positives


+ Stable recurring income portfolio continues to buffer earnings in absence of development income. 

  • Excluding the effects of acquisitions and divestments in 2017, we estimate the recurring income rental portfolio would have managed a c.3.7% y-o-y gain.
  • Largest contributor to recurring income remains The Metropolis, a Grade A office in Buona Vista which contributes slightly > 50% of total rental income by our estimates.

+ Recovering sentiment in high-end properties presents monetisation possibility for Sentosa properties. 

  • In a more optimistic change of tone vs previous quarters, management expressed the possibility of capitalising on the improved market sentiment and interest in high-end market. After falling 17 consecutive quarters, property price index for core central region properties recovered 1.7% since 2Q17. 
  • We have factored in capital values of S$1,500psf for the Group’s Sentosa properties in our RNAV calculation, which is in the lower end of the S$1,417-S$2,212 range transacted prices for these projects in the secondary market from 2017.


The Negatives

  • Impairment loss of S$16.8mn for JV project, Cape Royale in Sentosa. As a result, the Group reported net loss of S$4.4mn from jointly controlled entities in FY17.


Outlook


Outlook for the Group’s recurring income portfolio is stable. 

  • We estimate close to 20+% of leases in Metropolis could be expiring this year, most of which were the first batch of leases signed 5 years ago when the offices first opened. We estimate positive rental reversion at least in the mid-single digits. 
  • The recovering sentiment in the Singapore residential market bodes well for any re-launch possibility for Ho Bee Land’s three condominiums in Sentosa, currently held for rental. Our assumed capital value is at the lower end of the transacted price range since 2017. 
  • Successful re-launches above our assumed S$1,500psf capital value will be catalysts for an upgrade in RNAV.


Maintain ACCUMULATE with unchanged RNAV-derived target price of S$2.98.

  • Ho Bee Land trades at a 45% discount to NAV, below its post GFC average P/NAV of 0.63. We like it for its stable recurring income and undervalued high-end property portfolio. 
  • FY17 recurrent income is c.S$147mn per year, sufficient to cover 2.8x FY17’s S$53mn ordinary dividend (8c/share) per annum.






Dehong Tan Phillip Securities | https://www.stocksbnb.com/ 2018-03-02
Phillip Securities SGX Stock Analyst Report ACCUMULATE Maintain ACCUMULATE 2.980 Same 2.980



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......