Bukit Sembawang - Maybank Kim Eng 2018-05-25: Solid Development Pipeline

BUKIT SEMBAWANG ESTATES LTD SGX: B61

Bukit Sembawang - Solid Development Pipeline

Bukit Sembawang's FY18 net profit of SGD55m was 66% ahead of our estimate due to a higher-than-expected profit margin. While the DPS cut was slightly negative, we believe Bukit Sembawang can quickly pay down financing for its newly-acquired sites with the cash savings.
We fine-tuned our model to incorporate recently acquired Makeway View, lowered estimates for Nim Collection on efficiency adjustments and revised the sales trajectory. We rolled forward our valuation basis and introduced FY21E. Our Target Price is unchanged at SGD8.55, based on a 20% discount to a revised RNAV of SGD10.71 (from SGD10.68).

With a solid SGD2.6b development pipeline, we see Bukit Sembawang’s earnings at an inflection point. Maintain BUY.

FY18 revenue of SGD98m was inline with our estimate. However, higher-than-expected EBITDA margin of 60% (MBKE estimate: 33%) led to the earnings exceeding our forecast.
Management opted to conserve cash and declared a smaller DPS of 18 cts (FY17: 33 cts).

In late Mar-18, Bukit Sembawang acquired Makeway View, a prime freehold property near Newton Circus, which could add 154 units to its high-rise inventory. It met the vendor’s asking price of SGD168m or SGD1,626 psf ppr (including estimated development charge of SGD21m).
Compared to recent deals in the vicinity, the price paid was in line with that for Casa Contendere (SGD1,638 psf), but lower than for City Towers (SGD1,847 psf) and Dunearn Gardens (SGD1,914 psf). We have conservatively pplied an ASP assumption of SGD2,600 psf, in line with transactions at 26 Newton, which was completed two years ago.

Bukit Sembawang has a good mix of projects to ride the recovering housing market.
- For condominium projects, 8 Saint Thomas, Katong Park Towers and Makeway View have approximately 792 units in total, worth a combined GDV of SGD1.7b.
- For the landed housing segment, it has 295 units worth SGD0.9b from Watercove, Nim Collection (Ph 1 and 2) and Luxus Hills (Ph 8-10).
Revenue recognition from these projects will drive a clear rebound in earnings over the next few years.
Reiterate BUY.

Overpaying for land.
Poor execution of development projects.
Interest-rate spike could dampen demand for properties and drive down asset prices.
Policy tightening.

Derrick Heng CFA Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2018-05-25

SGX Stock Analyst Report BUY Maintain BUY 8.550 Same 8.550