1. Low P/BV
At current 37 cents, it’s 0.5 P/BV, with NAV at 74 cents as of 1H2020.
2. Improving dividend yield
5%. Based on Fy2019 results, it paid out 16% of earnings, with plans to acquire new sites for redevelopment.
3. Conservative management with decent capital recycling and grounded capital allocation plans
Management has developed a grounded business plan, deploying development profits towards new development projects. It has rather Low gearing of 26% D/A, meaning it has room for growth, evidenced by its recent successful bid for Yishun Ave 9 project. The new project should lead to a revised RNAV for the firm.
Risk:
1. It has earlier impaired about nearly 10m off its investment property in Melbourne during 1H2020 results. More impairment tests for the CGU For FY02020, there might be some possibility for further impairments which might be “Balanced” off by its development profits for this FY2020. Although non cash, returning hotel crowds might mean better ROE for the company in times ahead.
Overall: Share price might surprise on the upside, with the right catalyst in place. Still I believe the firm could have room to take up another JV project should the opportunity arise, given that they have been largely successful with the Profitable bids of sites and good project management capabilities.
31 Dec 2020
Share Price - ?
Est. BV - 0.76 (further recognition of Parc Botannia and some impairment of Melbourne Hotel)
Based on historical ratios, the share price might be trading at a range of 0.41 to 0.43 once more stable/non-covid sentiments kick in. There is also a potential, even without further acquisitions, for Sing Holdings to trade in 0.55 to 0.63 with the launch of the EC At Yishun in less than a year’s time (assuming a successful launch). This is due to the potential increase of NAV to 1.00-1.15 (Assuming no adjustment for dividends) in FY23-24, with the recognition of the EC project upon TOP/completion, subject to good project execution. I might be wrong in this but time will tell.
Further upsides:
1. Hence I believe - for further growth, the company, might have room for another project given that with the completion of Parc Botannia, they have room to go beyond one EC project as they have already done so the past with Waterwoods EC back in 2016.
2. Recovery of Hotel Business in Australia
3. Unlocking of value of industrial properties, given the non-active and rent-collecting model. Good but not effective usage of funds.
4. Unlocking of value of Hotel Business at the right time (but not anytime possible)
5. A more stable dividend policy (however not too possible given that property development is a cyclical yet potentially highly rewarding business, whilst a stable asset profile will lead to probably lesser but more stable returns) to attract investors. Ironically, such a model is more attractive to certain investors but potentially less profitable for the firm.
The current business model is good, a higher dividend will be reflected when the firm makes good monies and the dividends over the years hopefully will spread out as a healthy trend of good dividends (even without a policy).
But honestly speaking, a fixed dividend policy is less attractive for property development investors, as compared to a property business that grows in leaps and bounds with funds required for reinvestment and deployment, leading the firm value to hitting highs.
Every business attracts a different group of investors. Sing Holdings was tempered by the need to be aggressive and yet stable at times. This is a restrictive business model that still is successful and now I see it is growing beyond its existing model. This is further demonstrated during the most recent AGM, *“The CEO noted that some shareholders have also queried if the Company’s preference was to deploy its capital towards replenishment of its land bank or acquisition of additional investment properties. He noted in response that the Company’s priority is to undertake development projects to achieve better returns.”* and the Yishun Ave 9 successful bid is an evidence of this.
I do not see that hospitality investment business is a priority for the firm, perhaps due to the time needed to lock in funds, and still subject to impairment during challenging times. Hence, being at this stage of growth, the firm does not see this model as viable and rewarding for investors.
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