SINGAPORE (Oct 19): SAC Advisors is maintaining its “buy” call for Hong Lai Huat Group (HLH) given nearly 80% of the commercial and residential units in its D’Seaview development in Sihanoukville, Cambodia, have been sold.
The property and construction group has also agreed to sell its 98-room hotel in D’Seaview for $15.7 million which should translate into good margins since land prices in the city have skyrocketed since 2015.
In a Friday report, SAC analyst Terence Chua says he was impress by the rapid developments taking place in the city.
Sihanoukville, Cambodia’s only deepsea port, has seen a building boom in the last three years due to Chinese investments. The city is also part of the trade route drawn up under Xi Jinping’s Belt and Road Initiative.
SAC expects HLH to show a strong recovery in 2018 and 2019 as it recognises higher sales from D’Seaview and also signed an MOU with The Royal Group to develop a freehold plot of land at Phnom Penh.
Trading at 20 cents, the stock is valued 0.9x FY19 earnings and 0.28x FY17 book value versus sector average of 0.9x.
SAC is valuing Hong Lai Huat at 51 cents after applying 40% discount to RNAV, implying 0.8x FY18 book value.
“Despite jumping over 25% since our initiation of coverage on June 29, we see the company as deeply undervalued,” says Chua, “we maintain buy.”
HLH started at 'buy' on higher sales recognition of Cambodian development
