The following is an edited version of the recent post by Sumer, who's regarded as the resident guru on property stocks in our forum.

1. Roxy-Pacific has seen insider buying, which probably accounts for most of the recent rally. The company is starting to look outside Singapore as developers get crowded out of the Singapore market – a right move, IMO. I continue to like the management (active, sharp, good in execution) but at 68 cents, the stock’s discount to RNAV is not very steep now after the recent rally. I reckon RNAV is 90ct-$1, with the bulk of it being from its hotel.

2. Pollux’s latest annual report shows that Fragrance’s Koh Wee Meng is now among its top 20 shareholders. He probably sees Pollux as a company similar to his own – selling small units, small projects. The company is developing its Ganges Avenue site into serviced suites, perhaps to retain them for recurrent income. The upcoming AGM to be held at Mandarin Orchard seems a tad lavish, but it could be how the company wants to project itself. My RNAV estimate is about 19-20ct (stock price: 8.2 cents).

3. Heeton’s stock price strength (78 cents) should be supported by its impending trading cum bonus shares and bonus warrants. The company’s stakes in KAP, Newest, Sky Green and Boutiq – all of which sold very well – should mean that earnings visibility is solid for the next 3 years. The EPS from these projects are also very good. Next catalyst: launch of the Seletar Garden project. With a RNAV neatly above $2 per share, it has both assets and earnings stories. And it will soon be the only developer stock with a warrant. Will it be a target for “frying” by stock market players?

Ramada_HHRamada Hotel @ Zhongshan Park: This new 4-star hotel on Balestier Road is 50-50 owned by Hiap Hoe and Superbowl. NextInsight file photo4. Hiap Hoe’s (72 cents) recent rise was sweet, despite management’s inability to secure land for new projects so far. In fact, the company has been lacking in activities since its last land purchase years ago. However, it does sit on RNAV of above $1.50, and has a piece of land at Kallang Pudding which it is developing now (but which is not launched yet; once again showing that management tends to “build first” rather than “sell first” – which is a sharp contrast to Roxy management’s operandi modus). With the industrial property market showing signs of stagnation, there is a risk that HH could end up seeing its assets trapped in another property.

5. Superbowl: no action here, but its underlying assets are in the right sector – mainly shop spaces. RNAV of above $1.20 should support the stock price (51 cents), but the company lacks catalysts, like Hiap Hoe. Having said that, both HH and SB may suddenly spring to life should the major shareholders (who own more than 70% in each of them) attempt to privatise them. For those reasons, I continue to own both stocks.

6. Chip Eng Seng’s (71 cents) next catalyst should be its Yishun commercial and residential project, slated for launch this year. If this does as well as its Alexandra project, it should prop the share price up. The comapny’s Aussie website (google CEL Australia) indicates very briefly its 2 outstanding projects Down Under, the major one being the 1,000-unit Victoria Street project in Melbourne, which could be another commanding tower in the city. Management is still actively bidding for land but is not willing to overpay. My RNAV estimate: above $1.50.

7. KSH (51 cents): refer to Heeton as it has interest in similar projects. The company’s earnings visibility is also good for next 3 years. But RNAV of slightly above $1 makes it less attractive than Heeton.

8. Ho Bee ($2.07) is one of the 2 mid-cap property stocks that I still own, mainly for the potential revaluation surplus from Metropolis. It’s also venturing overseas – a right move at the moment. RNAV is around $3-3.50.

9. Hotel Properties ($3.19) is the other mid-cap property stock I like, mainly because I treat my investment in it as a proxy to buying a few sq ft of land in Orchard Road. I believe that among listed companies, it owns the biggest developable land in Orchard. Also, I believe the hotels it owns overseas are undervalued in its books. My own estimate of its RNAV is $5-$6.

10. Low Keng Huat (68 cents) has its PL Square story intact. The retail space is waiting to be monetized, and profits from its office units are not booked yet. Earnings visibility is also good. RNAV is around $1.10-1.20.

Macro-wise, however, the physical property market is heading towards the completion galore years of 2014-16. If US interest rates do go up from end-2013 onwards, talked about recently, then the double whammy of higher rates and big completion numbers may lead finally to a meaningful price correction in the physical market.

Nevertheless, because property stocks are now not crazily played up unlike in 2007/8, and because developers have already sold much of their stock and, in fact, lack land holding, the impact of any property slowdown may not be that drastic. Of course, that’s only one view, and only time will tell if it turns out to be a right one.

Previous article by Sumer:  
"Bonus issues do have material effect on stock prices"

Hupsteel is redeveloping its freehold property on 6, Kim Chuan Drive into a 7-storey industrial building. Photo: Google Maps

The following take on another second-liner property stock was posted by reader Paul Low in the forum:

Another stock which holds a host of freehold properties is Hupsteel. Its properties were last valued in 1993 at around $14m. This includes a total of some 50,000 sq ft of freehold industrial land, 2 freehold shophouses, and 4 freehold shoplets.

The company has announced plans for redeveloping 6, Kim Chuan Drive which sits on 33,000 sq ft of land into a 7-storey industrial building.

NAV is 33 cents based on 1993 land valuations. Stock recently traded at 22.5 cents.

Immense upside on its freehold gems awaits. Its management has been rapidly increasing its share buyback.

And despite its half-dead steel business, the company still pays dividends regularly.  The only catch is that its core steel business is highly cyclical.

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-1 #7 potatolover 2014-07-21 21:16
Shareholder value from this single project alone ~ $507mil , which is close to its current market cap (yet to be recognized in its books), based on very conservative assumptions!

And this is just one project and there are many others (Nine residence/Junct ion 9, progressively recognized, etc).
Its construction business will earn about EPS 5 cents per annum.

The current NTA of around 80 cents seem to be grossly understated. Given that company was buying furiously at 75.5 cents on average, it could not be just for a meager 10-20% gain (IMHO). In fact, company is sending a very clear and strong signal to its loyal shareholders.

The total intrinsic value by end of FY2015 would probably in the region of $1.60~$1.80
(very conservative, excluding TM and other pipe projects such as the Malacca retail/hotel, Fulcrum, Doncaster project in Melbourne)
-1 #6 potatolover 2014-07-21 21:15
I did some rough calculation using just one of its projects, Alexandra Central. It seems that just one major project can already create enough NAV to cover its current market cap.

a. 450 hotel rooms x $1mil per key = $450 mil (Valuation)
b. Commercial retail space = 90,000sqf x $5233 (source: property guru)PSF x 80% (efficiency ratio) = $377mil (REVENUE)
c. Total cost of investment = $320mil (land, construction, etc)
(land cost = $189mil. The construction contract was awarded to Keong Hong for $101mil).
[$350mil might have been "overstated" at company's website]
-1 #5 potatolover 2014-07-21 21:15
Chip Seng Seng is very undervalued. The Alexandra Central project alone is likely to increase its NAV by at least 60 cents.

Management bought back millions of shares at 0.74 to 0.76 cents. Current Market price is 0.805. Hence, Market Cap works out to be $516mil.

Did anyone estimate the obscene profit CES will reflect in its book in the coming few quarters?
-1 #4 Darrell 2013-11-24 19:30
Darrell.researc h(at)
-1 #3 Darrell 2013-11-24 19:29
Bro if u free/keen I'd like to buy you kopi/lunch/dinn er to seek your advice. Lots of property stocks, but me noob. Pls email me thanks.
+1 #2 Andy 2013-07-22 14:34
Location in Kim Chuan Dr is very non-glam. The area is low-cost industrial, so I wonder if the new 7-storey building's rental potential will be curtailed by the surroundings.
+1 #1 thinker 2013-07-22 04:53
With property sector in Spore looking very toppish now, the most likely trend for property is probably stagnanting or going downtrend for next few years...

If Hupsteel cannot find tenants for its industrial properties and its steel business is half dead, what prospect does it have now?

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