SINGAPORE (Aug 15): Phillip Capital is maintaining its “accumulate” recommendation on Ho Bee Land at a target price of $2.98, after the property developer last week announced its financial results for the quarter ended June.
See: Ho Bee Land posts 14.1% decline in 2Q earnings to $36.1 mil on lower revenue
In a report dated last Friday, analyst Tan Dehong highlights that while the group’s 2Q revenue came in within the research house’s expectations, its associate’s profits were higher than expected due to higher-than-forecasted average selling prices (ASPs) for Yanlord Western Garden, which remained stable in spite of property cooling measures.
“Ho Bee’s biggest development project in China, the JV project Yanlord Western Gardens maintained ASPs near RMB53k/sq m despite cooling measures in the country. The project is now 77% sold (vs 69% in previous quarter). Almost all units launched in the quarter are sold,” elaborates Tan.
He also notes that occupancy for Metropolis, which takes up 38% of the group’s total gross annual value (GAV), managed to main near full occupancy going into its second rent-renewal cycle since commencing operations in 2013 – with average passing rents holding stable y-o-y at $7+ psf.
However, Tan cautions of the slow recovery in the Sentosa residential market, as rents at the group’s three Sentosa condominiums remain at the 75-80% region in contrast to improving transaction volumes and ASPs in the core central region (CCR) in the year to date.
“Ho Bee’s local and overseas rental properties remain stable on the back of a bottoming in Singapore office rents. Their London office properties are on long leases of 5-10 years, which would enable it to ride out Brexit uncertainties in the short term,” says the analyst.
“Stable recurring rental income should continue to support earnings. We expect the recovery in the high end market to continue into FY18 which would benefit [the group’s] three Sentosa condominiums,” he concludes.
Shares in Ho Bee are trading 1 cent lower at $2.34 as of 11.23am.
