SINGAPORE (Nov 29): UOB Kay Hian is initiating coverage on Tuan Sing Holdings (TSH) with a “buy” recommendation and a target price of 71 cents – representing an upside of more than 70% to its closing price of 41.5 cents on Tuesday.
“Reputable developer TSH offers a unique opportunity to ride the property upcycle with an enviable $2.3 billion property portfolio, which includes prime Singapore freehold properties and key Australia hotel assets, at fire-sale prices,” says lead analyst Edison Chen in a report for retail investors on Wednesday.
Based on its last closing price, the property developer is trading at a 61.2% discount to its revalued net asset value (RNAV) and 52% of its book value.
On top of prized properties in prime districts in Singapore such as Robinsons Road and Upper Bukit Timah, Tuan Sing also boasts a portfolio of prime freehold hospitality assets Down Under in Melbourne and Perth.
A feverish rise in en bloc transactions marks the beginning of Singapore’s property market upcycle, Chen says. And Tuan Sing is poised to ride the wave.
“We like TSH as a proxy to the recovering Singapore property market due to its large exposure to the commercial and residential segments here,” Chen says.
In addition, the analyst notes that there could be an onset of a recovery in Grade A office rental as the pipeline supply eases significantly.
“With the completion of the redevelopment of 18 Robinson in 2H18, TSH will have a property portfolio in excess of $2.3 billion with the option to establish a commercial REIT platform which could immediately unlock $1.4 billion of value while retaining decent recurring income thereafter,” says Chen.
“This would also provide a platform for recycling capital for future developments,” he adds.
Going forward, Chen opines that Tuan Sing’s Sime Darby Centre offers further redevelopment potential as the area gears towards being a healthcare medical hub.
At the same time, Tuan Sing could also dispose of its non-core assets and property inventory, which could unlock gains of close to $150 million.
Indeed, Tuan Sing’s significant potential for growth has not gone unnoticed.
Hotelier and property magnate Koh Wee Meng, the founder and CEO of Fragrance Group, has paid as much as 45.5 cents per share to purchase a total of close to 69.5 million shares of Tuan Sing in the open market. This brings his direct interest in Tuan Sing to 5.905%.
“Given Mr Koh’s respectable background in the hotel and property markets, investors should ascribe significant value to TSH at current levels,” Chen says.
As at 12.29pm, shares of Tuan Sing are trading 2.5 cents higher, or up 6%, at 44 cents. This implies an estimated price-to-earnings ratio of 18.3 times and a dividend yield of 1.5% in FY17.
