SINGAPORE (Sept 2): CIMB Research is maintaining its “add” call on Guocoland on expectations that overseas income could grow in 2Q16 with residential sales from its projects in China and Malaysia.
In a Friday report, analyst Lock Mun Yee says she sees maiden contributions from 50%-owned Changfeng Residences in Shanghai to materialise from end-CY16.
Lock also expects further sales from its Damansara City project to filter down immediately to the bottomline given that the residential component of the project is completed.
Meanwhile, rental income in Singapore should also be boosted with the completion of Tanjong Pagar Centre in 3QCY16.
“We understand pre-leasing of the retail space is progressing well, with more than 60% of the retail space committed while the office component is seeing higher leasing interest,” says Lock.
“We estimate that when both components are fully leased out, Guocoland can generate an attributable $80 million share of annual rental revenue. This will provide another source of recurring income for the group.”
In 4Q16, Guocoland reported a 63% fall in earnings to $39.8 million although full-year earnings surged 168%, boosted by the sale of Beijing Dongzhimen.
However, revenue declined 16% in 4Q and 9% in FY16 with the completion of sale of residential units at Goodwood Residences, partly offset by progressive contributions from Sims Urban Oasis and Leedon Residence.
The group has proposed a total DPS of 9 cents, translating to a yield of 4.7%.
‘We maintain our Add call, with lower target price of $2.59,” concludes Lock.
Shares of Guocoland are trading flat at $1.90.
