DBS Group Holdings analyst Woon Bing Yong and Derek Tan have reiterated their “buy” recommendation on Tuan Sing Holdings after the company announced the sale of a 13% stake in its indirectly-held associate Gultech on May 2.
DBS Group Holdings is the only brokerage that has coverage on the counter.
The analysts have also upped their target price to 54 cents from 46 cents previously as they deem the sale as Tuan Sing “crystallising hidden gold”.
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“We continue to see good value in the stock even as its price-to-net asset value (P/NAV) nears +1 standard deviation (s.d.) from its three-year historical mean,” they write in a May 3 report.
“Apart from improved office fundamentals and the upcoming launch of projects in Opus Bay, the potential IPO of GulTech could further unlock value for shareholders,” they add.
“GulTech’s peers notably trade at an average historical price-to-earnings (P/E) of 29 times, a significant premium over GulTech’s 12 times historical P/E valuation in the stake sale to the private equity partners.”
The sale also represents a transformation into partial tech play in progress.
Following the sale, Tuan Sing’s effective interest in GulTech will fall to around 39%, where GulTech’s earnings growth may accelerate with help from its partners, say the analysts.
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While GulTech’s earnings have grown by a compound annual growth rate (CAGR) of 17.7% in the past five years, Woon and Tan have assumed a “more conservative growth” for GulTech in FY2021.
Another factor that could up Tuan Sing’s share price is the successful sales launch of Peak Residences amid the resilient Singapore private property market, write the analysts.
Shares in Tuan Sing closed 2.5 cents higher or 6.2% up at 43 cents or 0.4 times price-to-book (P/BV) on May 5.
