DBS Group Research analysts Tabitha Foo and Derek Tan are keeping their “buy” call on GuocoLand F17 as they see “exciting times ahead” for the group’s property development and investment businesses.
“GuocoLand’s property development business remains resilient, with strong pre-sales across most of its projects, despite higher interest rates and inflationary pressure,” they write.
“We continue to be optimistic on this front, as we anticipate the group will be able to replicate its end-to-end capabilities in future projects and see a similarly impressive sales momentum,” they add.
Foo and Tan are also upbeat on GuocoLand’s prospects on the flight-to-quality trend that will lead the office market recovery in Singapore. The trend is likely to see the group sustaining its high occupancy rates and positive rent reversions, the analysts note.
In their report dated Sept 7, the analysts raise the possibility of a potential restructuring, which could crystallise value for the group.
“With a growing portfolio of commercial assets, the potential securitisation of GuocoLand’s income-producing portfolio or conversion into a ‘stapled security’ could be a significant share price catalyst, with the potential upside ranging from 50% to 100%,” they write.
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At its last-traded price of $1.53 on Sept 6, GuocoLand is offers “attractive” valuations with a P/NAV multiple of just 0.40x with a yield of 4%.
In addition to their “buy” call, Foo and Tan have kept their target price unchanged at $2.30. The number is pegged to a “conservative” 60% discount to their revalued net asset value (RNAV) of $5.70 due to the stock being relatively illiquid compared to its larger developer peers.
The analysts’ RNAV factors in their fair value estimates for GuocoLand’s major investment properties and realisable values for its major development projects.
Shares in GuocoLand closed flat at $1.53 on Sept 7.
