SINGAPORE (Mar 2): Maybank Kim Eng is maintaining Ho Bee Land at "buy" as the developer trades at an undemanding 47% RNAV discount.
To recap, FY17 core EBIT came in line with Maybank's estimates as contributions from associates and JVs was better than expected on stronger China sales.
This was offset by an impairment of $16.8 million for its 35% stake in Cape Royale which brought down the carrying value of the property to $1,881 psf from $1,950 psf.
But with stronger sentiment in the high-end market, Ho Bee may now explore a possible relaunch of its unsold stock in Sentosa to capitalise on this.
"We note that Ho Bee has 453 unsold units across various projects (48 at Turquois, 103 for Seascape and 302 for Cape Royale) worth $2 billion on a 100% basis," says analyst Derrick Heng in a Thursday report.
With an impending rebound in Singapore's office market and narrow cap rates in recent transactions, Maybank is lifting its valuation for The Metropolis by lowering cap rates by 25bps to 3.75% .
The strengthening residential market has also led Maybank to raise average selling price to $1,800 psf from $1,650 psf.
"We raise RNAV to $4.48 from $4.23 and lift FY18-18 EPS by 2-39% to reflect a higher valuation at The Metropolis and ASP for Sentosa," says Heng who has increased its target price to $3.15 from $3.00.
For FY17, Ho Bee also announced a surprise DPS hike of 4 cents, which brought the full-year payout to 10 cents, translating into a solid yield of 4%.
"Looking ahead, we assume that it will sustain a recurring DPS of 8 cents," adds Heng.
As at 4.47pm, shares in Ho Bee are up 3 cents at $2.54.
