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Guocoland
Guocoland consortium buys Pacific Mansion site
■ Replenishing its Singapore residential land bank with top bid for Pacific Mansion collective sale
■ Transaction could add 4 Scts to RNAV, based on an ASP of S$2,700psf
■ Maintain Add with TP of S$2.88
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Chip Eng Seng Corp (CHIP SP)
Cheapest Dividend Proxy To Property Recovery
With a solid operating and dividend track record (no missed dividends since 1999 listing), reputable developer CES is the dividend proxy to ride on Singapore’s multisegment property recovery. With a S$1.15b property portfolio, S$127.5m profits secured, S$1.4b development value pipeline and 4.3% 2018 dividend yield (a S$0.02 special would mean 6.4%), the clearing of legal issues will help catalyse the stock. Initiate coverage with BUY and SOTP-based target price of S$1.38.
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City Developments Limited: No tapering of expectations
Crowded show flat for The Tapestry
Projecting S$1,250 psf ASP
Key proxy to sector recovery
Much abuzz over The Tapestry’s upcoming launch
City Developments Limited (CDL) announced last week that it is intending to launch its The Tapestry condominium project this coming Saturday on 24 Mar. We visited the show flat preview over the weekend and noticed a large crowd. According to CDL, more than 5,000 people visited the show flat in the first weekend of the preview (10-11 Mar), with strong enquires received. This is not surprising, as The Tapestry is the first major private condominium launch of the year amid recovering sentiment in the residential sector.
Expecting premium selling prices to adjacent projects
As a recap, The Tapestry is a 861-unit project located along Tampines Street 86, with nearby amenities and transport networks including MRT stations (both the Tampines East-West Line and Downtown Line and Tampines West Downtown Line), Tampines bus interchange, newly-completed Our Tampines Hub and schools such as St. Hilda’s Primary School. Drawing references from adjacent projects, we note that The Alps Residences, The Santorini and Q Bay Residences (all located along Tampines Street 86) achieved median selling prices of S$1,067, S$1,036 and S$1,102 psf for transactions which took place from Jan 2017 to Mar 2018. We have assumed an average selling price of S$1,250 psf for The Tapestry in our model, and believe this premium is achievable, given improving market sentiment and CDL’s strong reputation for its quality projects.
Continues to be one of our top picks
Based on CDL’s closing price of S$13.25, the stock is trading at FY18F P/B ratio of 1.20x, which is in-line with its 10-year average of 1.18x. After fine-tuning our assumptions, our RNAV-derived fair value estimate remains at S$15.91. CDL continues to be one of our top picks within the property sector, as we view it as a key proxy to the Singapore residential market recovery story.
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Singapore Healthcare
Second time lucky?
• Economic Times reported that IHH is set to launch a voluntary open offer for Fortis Healthcare, potentially competing with TPG-Manipal Hospitals
• We do not rule out this possibility given i) Fortis Healthcare’s share price has fallen some 23% since IHH walked out on the previous negotiations, and ii) IHH has secured a warchest of USD2bn multicurrency bonds and issued USD500m of perpetual securities
• If a takeover is successful, the buyout offer for RHT could likely go through (RHT’s current price at 77.5 Scents vs offer price of 90 Scents). On a combined basis, we estimate the acquisition to be at 18x FY19F EV/EBITDA
• Market could be sceptical given unresolved issues within Fortis and the promoters. Integration costs could moderate IHH’s near-term earnings growth potential but we note that IHH has successfully turned around Global and Continental Hospitals within one year of acquisition
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