SINGAPORE (July 16): OCBC is reiterating its “buy” recommendation on KSH Holdings with a lowered target price of 94 cents.
This came despite the group’s stock price falling 4.7% to 61.5 cents on Jul 13, following the Singapore government’s recent announcement on new property cooling measures.
In a Monday report, lead analyst Deborah Ong says, “While we do see the latest round of cooling measures as effective curbs to new enbloc sales in the near-term, we are still optimistic about the $8.6 billion of already successful enbloc transactions in 2017 and the additional more than $9 billion of transactions YTD 2018.”
The analyst also estimates that the bulk of en bloc redevelopments have yet to award construction contracts as they take time to apply for lease top-ups and seek approvals for the development of the site.
Moreover, the group’s construction order book currently stands at about $542 million, even disregarding this pipeline of future projects. This is one of the highest it has been at the end of a quarter since 1Q14.
“We believe the predictive value of the order book size is high on the revenue of the following six quarters, and expect the construction segment to turn a corner in 2018,” says Ong.
With the slew of en bloc redevelopments in the pipeline along with a public sector projects this year, the analyst believes that the group’s construction segment has more quarters of strong earnings growth in store, which has yet to be priced in.
Nonetheless, the group is still primarily a construction player and the analyst continues to see upside to its price as at Jul 13.
Previously, it was noted that the group planned to launch four residential projects in Singapore this year with associates and joint ventures (JV), with the group’s effective share in these projects translating into an aggregate of about 800 additional units.
As at 11.37am, shares in KSH are trading at 61 cents or 8.1 times FY19 earnings with a dividend yield of 4.9%.
