SINGAPORE (March 2): DBS Group Research likes Bukit Sembawang Estates as it is a potential takeover target for investors looking to gain access to land in Singapore and boasts of a substantial freehold/999-year lease landbank.
(See also: Bukit Sembawang stirs interest as it moves to unlock land value)
According to an unrated Thursday report, lead analyst Rachel Tan says Bukit Sembawang is the largest owner of land in Singapore, owning more than 2.8 million sf of substantially freehold/999-year leasehold land, of which 75% is undeveloped.
In addition, the group’s Paterson Collection and St Thomas Walk developments in the core central region is expected to do well if launched given the positive sentiment in the luxury residential market.
As at Dec 16, the group has a net cash position $383 million or $1.48/share, implying close to one third of its market cap is backed by cash. In the past two years, it has declared an annual dividend of 33 cents, implying a dividend yield of 7%.
To be sure, Bukit Sembawang’s major shareholder, Lee family of Lee Rubber and OCBC, owns a 44% stake which could be put it up for sale given the family has been in a “divestment” mode in the past few years.
“Given ample liquidity and recent M&A deals in Singapore, we believe that Bukit Sembawang is an attractive prospect for any investor/developer who wants access to land-bank in Singapore,” says Tan who has a potential $7.55 target for the stock.
Shares of Bukit Sembawang are up 18 cents at $5.03.
