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


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.

Reiterate ADD rating on Ho Bee Land

  • 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.

Continues to increase recurring income base

  • 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.

Replenishing Australia development landbank

  • 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.

Pace of China residential settlements likely to moderate in 2H20F

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