Real Estate Day Wrap-Up - CGS-CIMB Research 2019-04-17: GuocoLand, Ho Bee Land, PropNex


CGS-CIMB Real Estate Day - Key Highlights From Participating Companies


  • GuocoLand Limited (SGX:F17)’s principal activities are property development, property investment, hotel operations and property management. Its geographical markets span Singapore, China, Malaysia and Vietnam, comprising residential, hospitality, commercial and retail developments. GuocoLand expanded into the United Kingdom and Australia through a strategic partnership with Eco World Development Group Bhd in Eco World International Bhd.
  • Common questions raised by investors were generally related to:
    1. view on its balance sheet metrics vs. other Singapore listed peers;
    2. updates on the performance of its Singapore assets and
    3. latest developments at its China project.
  • According to management, GuocoLand’s net gearing of c.84%, which is higher vs. other major listed peers, is due to the completion of Tanjung Pagar Centre as well as a development project in the pipeline, namely Guoco Midtown. The latter is expected to be completed by 2022.
  • On its Singapore residential projects, the buyer profile for projects such as Martin Modern was largely locals, although current sales are seeing a slightly higher proportion of foreign buyers. The project is 70% sold. The Tanjung Pagar Centre office component is almost full, with average passing rent at the high single-digit level. Rental reversions will take place gradually from FY20 and more in FY21 and FY22. Retail occupancy is also full.
  • Following the release of the Master Plan 2019, GuocoLand indicated there are no immediate plans to redevelop the Collyer Quay building and any asset enhancement plans would need to be carried out with the neighbours.
  • On its China project, there is a slight delay at the Chongqing project due to planning changes and it is awaiting more clarity from the regulators.
  • Rating: ADD; Target Price: S$2.25.


  • Ho Bee Land (SGX:H13) has property investments and developments in Singapore, Australia, China and the United Kingdom. Its real estate portfolio covers many quality residential, commercial, hi-tech industrial projects. Apart from being a leading developer of luxury homes in the exclusive Sentosa residential enclave, Ho Bee Land's investment property portfolio includes The Metropolis, a commercial landmark in the one-north precinct in Singapore and seven other buildings in London.
  • Common questions raised by investors were generally related to:
    1. view on Brexit and any impact on the group’s UK investment property portfolio so far;
    2. updates on its Singapore and China residential projects and
    3. dividend policy.
  • According to management, the UK investment property portfolio remains stable with an average lease expiry of seven years and tenants from government agencies and tier-one banking names. Demand remains strong. In the event of a hard Brexit, management indicated it could look for further opportunities within the market.
  • On the Singapore residential market, Ho Bee Land indicated that development opportunities with reasonable returns appear limited in the near term. Meanwhile, its China projects in Tangshan and Zhuhai have benefited from rising prices and would continue to impact bottomline positively when the completed units are handed over to the purchasers.
  • On Ho Bee Land's dividend policy, management indicated that the 10 Scts DPS paid in FY18 is well supported by its recurring rental income.
  • We maintain our ADD rating and Target Price of S$3.00. With a high recurrent income profile, we think Ho Bee Land can continue to maintain its dividend per share level.
  • Key risk is forex volatility and impact of Brexit on asset values.


  • PropNex Limited (SGX:OYY) is an integrated real estate services group with real estate brokerage, training, property management and real estate consultancy businesses. It has over 7,500 sales professionals. In addition to an established presence in Singapore, PropNex has a presence in Indonesia, Malaysia and Vietnam.
  • Common questions raised by investors were generally related to:
    1. outlook on the Singapore private residential market;
    2. updates on overseas expansion activities and
    3. strategy to attract and retain an agent pool.
  • On the Singapore property market outlook, management expects transaction volume in 2019 to be similar to 2018 with demand coming from en-bloc sellers and also HDB upgraders. Due to the bumper crop of HDB flats reaching their Minimum Occupation Period (MOP) in 2019, PropNex expects transaction volumes to be strong as a significant proportion of HDB homeowners upgrade to a private property or move to a more preferred location. In line with this, PropNex has launched its HDB Auction service as another avenue for transactions and also to help with price discovery.
  • In terms of overseas expansion, PropNex has been expanding into Indonesia, Malaysia and Vietnam, with Indonesia the largest overseas franchise boasting c.1,000 agents across 18 offices. Management remains bullish on Indonesia due the larger market size compared to Singapore and also the saturation in the Singapore market.
  • Despite similar commission rates in the resale and project sales segments (c.3% commission rate), the commission payout to agents in Indonesia tends to be 50% compared to 70-90% in Singapore.
  • Management aims for PropNex to be among the Top 5 players within the first five years of entering a new market. Although its overseas expansion has been via a franchise model, management does not rule out the possibility of taking a minority stake in an operating agency business.
  • In terms of growth strategy, management believes that PropNex's focus on training agents and educating consumers allows it to retain its competitive edge and to grow its agent pool. It has delivered impactful training and development programmes for its agents and also held quarterly conventions where government officials were invited to help agents understand macro trends and government policies. It also cited its Dual Career path scheme which helps to groom agents with leadership potential.
  • PropNex has also organised multiple consumer seminars to help home buyers make more informed decisions.

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LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-04-17
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