PhillipCapital analyst Vivian Ye has maintained her “buy” call on LHN Limited with a lower target price of 49 cents from 54 cents, citing strong outlook for all business segments and higher demand for co-living and self-storage spaces.
In a Dec 1 report, Ye notes that LHN’s FY21 results were below expectations. Following this, PhillipCapital has lowered its FY22E PATMI by 16% as it reduces its revenue forecasts for the residential and commercial properties as well as facilities management.
“We now peg the stock to 7 times FY22E price-to-earnings ratio (P/E), down from 9.5 times FY22E P/E, still a 50% discount to the industry average,” says Ye.
LHN’s revenue contribution from industrial properties decreased due to the expiry of four master leases in FY20, while the revenue contribution from commercial properties was lower due to the expiry of three master leases in FY21.
Commercial properties swung from a net profit of $3.2 million in FY20 to net loss of $938,000 in FY21. This was mainly due to the lower demand for offices amidst the prolonged work from home trend becoming the new normal, says Ye.
On the bright side, LHN’s FY21 PATMI increased 16% to $28.1 million. Profit before tax for Coliwoo co-living properties in FY21 was almost thrice that of $898,000 in FY20.
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Profit before tax for facilities management jumped 85%, driven by the joint venture acquisition of Bukit Timah Shopping Centre carpark in Dec 2020 and the acquisition of 33 JTC car parks in January 2021. There was also an increase in facilities management services amid the pandemic, says Ye.
Moving forward, LHN is expanding its Coliwoo portfolio — there are five residential properties expected to commence operations in FY22 under the Coliwoo co-living portfolio.
“Most recently, a Mount Elizabeth Property was acquired, which will be part of LHN’s expansion of its Coliwoo portfolio. It is a residential property with a Gross Floor Area of approximately 104,375 sq ft, and 22 storeys.
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“Excluding the Mount Elizabeth Property, we expect five properties to add 200 keys, representing a 25% increase for FY22. The strong momentum of demand for these properties is also expected to continue, with the trend of more millennials moving out, the work from home trend becoming the new normal and a gradual reopening of borders,” says Ye.
LHN has also submitted an application to the Stock Exchange of Hong Kong for the proposed spin-off and separate listing of the shares of LHN Logistics Pte Ltd, which will hold the logistics services business of LHN. It is expected that LHN will continue to hold majority shareholding in LHN Logistics, which will remain consolidated with LHN.
The applications are still being considered and there is no assurance that the proposed spin-off will be approved, Ye highlights.
As at 4.07pm, shares in LHN are trading 1 cent lower or 2.98% down at 32.5 cents.
