Amara - RHB Invest 2020-03-04: COVID-19 Affected, But Valuation Attractive; BUY


Amara - COVID-19 Affected, But Valuation Attractive; BUY

  • Stay BUY with a new SGD0.78 Target Price from SGD0.88, 95% upside plus 5% FY19 yield – pegged to a 44% discount to RNAV.
  • After checking with management, the risk for Amara (SGX:A34) lies on further developments to tourism trends consequent to the COVID-19 outbreak. However, as the counter is trading at a steep discount to its RNAV, we believe there is value and retain our recommendation.

We cut our FY20F net profit 14% to SGD18.6m on lower occupancies

  • We cut our FY20F net profit 14% to SGD18.6m on lower occupancies for Amara’s hotels. The COVID-19 outbreak has affected tourism across the region. This includes Singapore, China, and Thailand, where the group has its establishments.
  • We are assuming a gradual recovery thereafter, and that FY21F earnings should be minimally affected by COVID-19. Hence, we cut our FY21F net profit by a much smaller 6%.
  • FY19 net profit of SGD28.2m was ahead of our SGD18m expectation, due to stronger-than-expected fair value gains on investment properties. Whilst no breakdown was disclosed by management, the gains were for its investment properties that include retail and office assets in Singapore and Shanghai.
  • Amara’s Shanghai retail and office properties are fully leased out, with leasing gathering momentum from Apr 2019 onwards.

Residential property developments progressing well.

  • The:
    1. 33-unit M5 development is substantially completed and awaiting its certificate of statutory completion;
    2. Bedok development of four semi-detached homes is expected to obtain temporary occupation permit (TOP) within 2020;
    3. 56 units at 10 Evelyn are expected to obtain TOP by 1Q21.

Trading at a steep discount to RNAV.

  • Amara has declared total dividends of 2 cents/share, consisting of final and special dividends of 1 cent/share each. This gives a respectable FY19 yield of 5%.
  • Amara is trading at a 43% discount to NAV of SGD0.70/share. Including the surpluses for its hotel assets – which are not included in its P&L fair value gains – Amara’s estimated RNAV is SGD1.39/share.
  • We applied a 44% discount to this RNAV to derive our SGD0.78 Target Price. We believe Amara’s share price will trend closer to our Target Price when we are close to COVID-19’s peak.
  • See Amara Share Price; Amara Target Price; Amara Analyst Reports; Amara Dividend History; Amara Announcements; Amara Latest News.

Leng Seng Choon CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-03-04
SGX Stock Analyst Report BUY MAINTAIN BUY 0.78 DOWN 0.880