SINGAPORE (Mar 20): Maybank Kim Eng is relieved Bukit Sembawang has finally put what it sees as an "overcapitalised" balance sheet to work and acquired its first condominium site in a decade with Katong Park Towers.
The redevelopment site is located in the East Coast and is within 200m of the future Katong Park MRT Station due to be completed in 2023.
According to Cushman & Wakefield, the sale price of $345 million translates into a land rate of $1,280 psf after taking into account $60 million to be paid to upgrade its land lease to 99 years. This compares with $1,515 psf for Amber Park and $1,427 psf for Nanak Mansions.
"Assuming an eventual ASP of $2,200 psf, we estimate a development surplus of 22 cents for this project," says analyst Derrick Heng in a Tuesday report.
With a net cash position of $227 million as of Dec 2017, Heng says Bukit Sembawang can comfortably fund this deal with its current resources. Even after building in the entire land cost to be incurred, its net gearing will only inch up to a moderate 0.04 times in FY19.
Bukit Sembawang is expected to launch the project just before the completion of a metro station nearby and contribute to earnings from FY21 onwards.
Meanwhile, Maybank is lifting Bukit Sembawang's FY19-20 EPS by 5% for higher average sale prices at 8 Saint Thomas to reflect escalating land prices in the vicinity and strong prices seen at new launches in the prime area.
The prime freehold project located just off River Valley Road should command a premium over Martin Modern given its freehold status. Furthermore, the recently announced deal for Pacific Mansion also paints a bullish picture for future prices in the area.
"Our assumption is not aggressive considering a strengthening market and $3,200 psf achieved at the recently launched New Futura," says Heng.
Maybank is raising Bukit Sembawang's RNAV-based target price to $8.55, based on an unchanged 20% discount to a revised RNAV of $10.68. Maintain "buy".
As at 12.29pm, shares in Bukit Sembawang are up 7 cents at $6.10.
