Ho Bee Land - CGS-CIMB Research 2020-09-11: New Investments In Singapore & Australia

HO BEE LAND LIMITED (SGX:H13)

Ho Bee Land - New Investments In Singapore & Australia

Ho Bee Land’s investment property portfolio is growing with Biopolis P6 land win.
Development income visibility improving with replenished Australia pipeline.
Reiterate ADD rating with a higher Target Price of S$2.70.

We raise our RNAV estimate by 5.5% to S$5.40 to factor in Ho Bee Land’s latest capital deployments into c.S$250m worth of new investments over the past six months. As such, our Target Price rises to S$2.70, based on an unchanged 50% discount to RNAV.
Additionally, our FY20F EPS is also increased by 5.88% as we factor in a faster-than-projected handover of residential units in China.
We continue to like Ho Bee Land (SGX:H13) for its strong recurring income profile, derived from rentals in Singapore and UK.
Upside catalyst: continued deployment of capital; downside risk: asset devaluation from its investment property portfolio.

In Mar 2020, Ho Bee Land won a land tender at Biopolis P6 at one-north for S$223.6m. To be completed in end-2022F, the mixed-use bio-medical sciences (BMS) development is approved for 35k sqm of business park space for BMS research and supporting activities, and 6k sqm of office and retail space. We estimate a gross development value of S$400m-450m for the property and a net yield on cost of 5-6% on completion.
Ho Bee Land’s net debt to equity was healthy at 0.66x at end-1H20. Recurring income is likely to continue expanding, translating to strong income visibility. About 50% of Ho Bee Land’s current investment property portfolio of S$4.6bn, at end-1H20, is in UK and the rest in Singapore. The portfolio enjoys 100% occupancy and the UK properties have a long average lease to expiry of 5 years.
In terms of COVID-19 impact, Ho Bee Land indicated that ancillary F&B tenants within its office properties in Singapore and the UK were adversely impacted due to the pandemic but we estimate these make up only a small 1-2% of topline.

Ho Bee Land continues to see more development opportunities in Australia and acquired two residential land parcels, totalling 56.39ha, in Queensland in Jun 2020, for A$23.5m. These acquisitions can yield a total of 665 land lots and will enable the group to replenish its development landbank in Australia and extend forward development income visibility, in our view.
The smaller land parcel, located in Bli Bli, with 95 land lots, is part of the final two stages of the Parklakes 2 development, and has received all the required development permits. Ho Bee Land expects contributions from this project to be felt in 1-2 years’ time.
According to management, the Ripley site, located in the Ripley Valley Priority Development Area, a major growth corridor in South East Queensland, is expected to yield 570 residential lots, a regional sports facility and associated community facilities, and would boost Ho Bee Land’s medium-term development pipeline.

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Ho Bee Land posted a 115% y-o-y jump in 1H20 PATMI to S$90.6m, mainly due to a strong jump in associate and JV contributions to S$34.3m (vs. S$2.7m loss in 1H19) with profit recognition from its ongoing residential projects in Shanghai, Zhuhai and Tangshan. We anticipate the pace of handover of additional units from these projects to moderate in 2H20F, before picking up pace in 2022F.
Ho Bee Land continues to be on the lookout for opportunities to replenish its landbank in China.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-09-11

SGX Stock Analyst Report ADD MAINTAIN ADD 2.70 UP 2.56