Thanks Joes. Heeton is a rather safe stock, backed by lots of assets and future earnings which are locked in. A few things that I am still hoping for are:
1. That it monetizes some of its assets like Sun Plaza or its 2 marts. The company is not as cash rich as some other prop counters I own.
2. That it manages to dispose of more units at Lumos and Onze, and manages to sell off iLiv, releasing cash.
3. That the stock becomes more liquid. Hopefully through more bonus issues.
Otherwise, the company should be reporting rather consistent profits over the next 2-3 years, based on good sales in its various JV projects. It's dormitory business may get a little attention if it is well expanded while any sudden sale in any of its investment properties will mean a sharp rise in the stock price, as there are less than 300m issued shares.
Meanwhile, it is likely that the major shareholder family will exercise the warrants (by Sep 2015), which will mean they will be buying into the share at a price of 70ct. That should give investors confidence about the stock price.
Aside from recognisable names like Morph Investment, which are big shareholders of BONVESTS, there is also another one I recognise -- ANG HAO YAO on the Top 20 list with 628,200 shares. His stake is worth about S$822,000 currently.
1. Lian Beng – OSK-DMG’s latest report talked about Lian Beng’s purchase of Prudential Tower with 3 other parties. Based on its projected piecemeal sale price of $2,600 psf compared to the purchase price of $2,219 psf, it is estimated to earn Lian Beng $23.3m if the whole tower is sold (or $5.1m if it is kept for rental). Assuming this is pre-tax, the net EPS due to Lian Beng is about 3.6ct if 100% sale is achieved.
2. KSH – Co is a partner in the above purchase. Based on the same OSK figures, KSH’s share (28% stake in tower) of profit is $20.3875m. Again assuming this is gross profit, net will be $16.7m or about 4.4ct per share. The EPS from this deal attributable to KSH is higher than that to Lian Beng.
KSH is due to report full year earnings, like Lian Beng, next week. I expect an EPS of about 11-12ct, giving the stock a PE of 4-5 times. Lian Beng could report about the same EPS, but its PE will be higher due to its higher stock price.
KSH has quite a bit going on for itself, with good sales from its various JV projects (main ones: Boutiq, Sky Green, KAP, Newest, 3 Flora projects) giving very good earnings visibility for the next 3 years. In addition, it is launching (soon or in the process) 2 commercial projects which should be quite profitable: Trio at Sam Leong (100% shops) and Hexacube (100% retail and office). Its recent venture overseas (Cambodia and Malaysia) as well as its good sales in a China project and another potentially huge JV near to Beijing (Oxley is a partner) provide the company with an out-of-Singapore exposure.
OCBC covers the stock, setting a target of 72ct based on SOTP, as the co has a construction arm. My own figures show a RNAV of above $1, taking into account only its development projects and ignoring its construction business. I continue to like KSH and am also keeping an eye on Lian Beng.
3. Fraser Centrepoint – I had meant to write a bit about this counter, but the stock has run up quite a bit over the past week, so I hesitated because I am cautious about a pullback. The recent rise is in part due to 2 brokerages (including CLSA) starting to cover the counter. You may want to read the analysts’ reports instead as my research on the company is rather scanty at the moment. Nevertheless, I like Fraser for its ability to monetize its assets, its fantastic execution in the Aussie market (especially Sydney), the imminent listing of its hospitality REIT, and its string of completed and under-construction projects which could later be injected into its baby REITS. In particular, I like its 2 big projects in Yishun and Tanjong Pagar.
4. Heeton – Just a little note here on its Top 20 shareholders: Kim Seng Holdings upped its stake in the company from 15m to 18m shares in 2013, owning now 6.7% in the company. Kim Seng Holdings is a vehicle of Tan Kim Seng of Ezion/Ezra/Swissco fame. Perhaps they see the $2 RNAV of Heeton that I am attracted to.
5. Pollux – I saw an ad in the Straits Times on Saturday for its Mayfair project, indicating that there are only 3 units remaining. This seems to be a big improvement from 11 that were unsold at end-April. The company’s 3 East Coast projects (the others are Berkeley and Garden Park) have managed to sell steadily this year, and this is positive.
The problem with this counter has always been liquidity, so hopefully the full year results due this month will lead to a bit more volume traded. I am hoping that profits from its various projects will start to kick in more meaningfully this financial year, especially with the gradual recognition of possibly $30m gross profit from Pavillion Square (shops and resi) alone. This compares with its current market cap of only $44m.
KSH's net profit came in slightly below my expectation, perhaps due to the way revenues and costs arose during the quarter, and nothing to worry about.
A DPS of 1.75ct brings full year DPS to 3ct, within expectations.
I note that cash pile is rising nicely, rising from $65m to $126m. The TOP of Cityscape later this year would bring in more cash.
Meanwhile, BT has an article today on the expected hotel room shortage in Singapore next few years. The writer sees room occupancy rate rising from 80% to a very tight 91%, and this could mean an increase in hotel room rates.
Stocks with good exposure to this imminent situation are Hiap Hoe, Chip Eng Seng, Roxy-Pac, Hotel Grand Central, HPL, Bonvests, Far East, Amara, Global Premium, among others.
Oxley and Hong Fok are also putting up hotels over the next couple of years.
