HERE ARE SOME updates on the property stocks that I track:
Ramada Hotel @ Zhongshan Park is one of two new hotels in Balestier which are 50% owned by Hiap Hoe. NextInsight file photo1. Hiap Hoe: At last, some action at HH. I view its purchase of a stake in Ley Choon as neutral, as I am not familiar with the latter’s business. It’s an earnings story, a small investment, and something not very relevant to HH, in my opinion.However, its second deal – that of a piece of land in Melbourne that already has plans drawn up for 2 towers (one of which is 43-storeys high), 425 apartments and 452 parking lots – is a much larger deal and hence, more exciting.
HH paid S$28.8m for the site, but the Gross Development Value is likely to be well over A$200m, assuming just A$500k per apartment unit. HH, however, may redraw the towers and incorporate a serviced apt/hotel component.
If you search via Google Earth, you will see that the site is well situated, with quite unblocked views, and near to the CBD.
While HH may be a tad late in the Melbourne apartment game, the company has no choice but to venture overseas as the competition for land in Singapore is just too stiff.
Being a value-buy developer, it must have decided that it’s safer to buy a piece of land in Melbourne than in Singapore at the moment. After all, what can S$33m buy you over here? A Good Class Bungalow plot for one house?
HH has joined Chip Eng Seng (CES) in venturing into Melbourne. But until HH shows that it rewards its minority shareholders better with reasonable dividend payouts, and until it shows that it can sell its properties well ahead of completing them, I personally like CES more at the moment.
(NextInsight note: Hiap Hoe has just announced an interim dividend of 1.2 cents a share, up from 0.25 cent in 1H last year, along with a 74% jump in net profit to $29 million in 2Q2013).
Nevertheless, both counters are in my bag for the same main reason – deep discounts to RNAV with earnings visibility to boot.
Meanwhile, HH has recently sold quite a few units at Skyline 360, and has offered $150k renovation packages to push sales of unsold units at Skyline, Treasure and Signature at Lewis. This is a positive move, and shows management’s response to a slower higher-end market.
Also off the radar is the on-going pre-trial hearings between HH’s majority shareholders’ family members, which apparently means the feud is not settled yet. The last such hearings were held just last week.
2. Heeton: I just learned of 2 recent developments that are significant.
Sun Plaza, which is next to Sembawang MRT station, is a 50-50 investment property of Koh Brothers and Heeton.Internet photo: Louie (Lee SangYong)Firstly, the company is apparently closing Sun Plaza for major renovations. I hope this entails adding some net leasable space to the old shopping centre, which is so conveniently located next to the Sembawang MRT station. Could the company be priming the building for a sale after all? Heeton has a 50% stake in the shopping centre.
Secondly, El Centro is apparently now slated to be pulled down by 1H next year, and a new building will be put up. It seems that a showroom is now being set up.
If Heeton sells the shop and apartment units there, the profits could be very substantial as the book value of the present building, I suspect, is very low. If the company can sell the freehold project (including shops) at an average of $3,000 psf, a gross profit of about $70m is possible, depending on assumptions. That translates into a gross profit of over 30ct per share.
3. Pollux: Company confirms that it is keeping Ganges Centre for income, after it is A&A-ed into a serviced apartment. The A&A ($12m) will save the company some money (vs tearing the building down).
Perhaps Pollux is treating this as an interim move, in view of the site’s present plot ratio of only 2.1 in a prime area where all the HDB flats are already built on higher plot ratios. The site is also near the future Great World City MRT station.
4. KSH Holdings: UOBKH has initiated a report on the company, the second broking house to do so. I was impressed with KSH’s boss at the recent AGM and I believe the company is in good hands. He is rather investor friendly, and seems like someone who will look after small investors’ welfare well.
UOBKH’s report has shed much light on its China projects, which I believe will be very profitable. The company will also be launching almost all of its remainder 5 JV projects in Singapore over the next 6 months. Good sales here will provide the catalysts for stock price movements.
Recent articles:
