Ho Bee Land Limited (HBL) Summary
Core Content
Ho Bee Land Limited (HBL) is a property investment company with a focus on commercial and residential properties in Singapore, London, China, and Australia. The company has a diversified portfolio and is currently trading at a steep discount to its RNAV (Revalued Net Asset Value), with a discount of 30%. The management has expressed optimism regarding the company's future performance and has maintained an ACCUMULATE recommendation with an unchanged RNAV-derived target price of S$2.98.
Main Points
1Q18 Results Overview
- Total Revenue: SGD 50.2 million, slightly below forecast.
- Net Profit: SGD 49.6 million, down 12.2% YoY.
- Rental Income: Increased by 6.1% to SGD 37.8 million, driven by stable recurring income and an office acquisition in London.
- Sale of Development Properties: Increased by 60.6% to SGD 10.9 million, including a profit of A$2.9 million from the sale of a small site in Gold Coast.
- Share of Profits from Associates and JVs: Declined by 12.4% to SGD 30.2 million, primarily due to lower recognition of sales from the China JV project Yanlord Western Gardens.
Key Assets and Projects
- Metropolis: Fully leased, with 30% of leases expiring this year. Expected flat to low single-digit reversions. Contributes approximately 55% of total rental income.
- Sentosa Properties: A relaunch is planned for this year, with 151 unsold units at Turquoise and Seascape. Secondary transaction volumes increased to 17 units in 1Q18, the highest since 2012, although prices remain low at around S$1,600 per square foot.
- Continental Europe Expansion: The Group is investing EUR 90 million in a Credit Suisse European property fund and a commercial building in Munich. The fund is expected to deliver a double-digit net IRR, with the Group potentially achieving a higher IRR through leverage.
Financial Highlights
Income Statement (SGD mn)
| Item |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| Revenue |
130 |
299 |
165 |
167 |
169 |
| Operating EBITDA |
118 |
130 |
133 |
103 |
122 |
| Depreciation & Amortisation |
1 |
1 |
1 |
0 |
0 |
| EBIT |
117 |
129 |
132 |
103 |
122 |
| Net Finance (Expense)/Inc |
(23) |
(30) |
(25) |
(21) |
(21) |
| Other items |
1 |
2 |
3 |
4 |
5 |
| Associates & JVs |
(23) |
33 |
95 |
32 |
8 |
| Revaluation Gains |
186 |
104 |
78 |
0 |
0 |
| Profit Before Tax |
258 |
237 |
279 |
115 |
109 |
| Taxation |
(17) |
(20) |
(28) |
(19) |
(19) |
| Profit After Tax |
241 |
217 |
251 |
95 |
90 |
| Net Income, adj. excl reval gains |
55 |
113 |
173 |
95 |
90 |
Per Share Data (SGD)
| Item |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| EPS, reported |
0.36 |
0.33 |
0.37 |
0.14 |
0.14 |
| DPS |
0.07 |
0.06 |
0.10 |
0.08 |
0.08 |
| BVPS |
4.23 |
4.41 |
4.70 |
4.76 |
4.82 |
Cash Flows (SGD mn)
| Item |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| CFO |
- |
- |
- |
- |
- |
| Profit before tax |
241 |
217 |
251 |
95 |
90 |
| Adjustments |
(139) |
(78) |
(128) |
6 |
30 |
| WC changes |
(120) |
71 |
10 |
(10) |
(2) |
| Cash generated from ops |
(18) |
210 |
132 |
91 |
118 |
| Taxes paid, others |
(3) |
(31) |
(19) |
(19) |
(19) |
| Cashflow from ops |
(21) |
178 |
113 |
72 |
100 |
| CFI |
- |
- |
- |
- |
- |
| CAPEX, net |
(2) |
(2) |
(5) |
(1) |
(1) |
| Purchase/sale of investments |
(577) |
3 |
(0) |
(47) |
0 |
| Dividends |
1 |
1 |
37 |
1 |
1 |
| Others |
(0) |
18 |
2 |
0 |
0 |
| Cashflow from investments |
(577) |
21 |
(63) |
(46) |
1 |
| CFF |
- |
- |
- |
- |
- |
| Purchase of treasury shares |
(3) |
(1) |
0 |
0 |
0 |
| Loans, net of repayments |
640 |
(110) |
(31) |
44 |
(21) |
| Dividends paid |
(34) |
(47) |
(40) |
(67) |
(53) |
| Others |
0 |
0 |
0 |
0 |
0 |
| Cashflow from financing |
603 |
(158) |
(71) |
(22) |
(74) |
| Net change in cash |
5 |
41 |
42 |
4 |
26 |
| Effects of exchange rates |
(0) |
(1) |
(0) |
0 |
0 |
| CCE, end |
15 |
54 |
97 |
101 |
127 |
Balance Sheet (SGD mn)
| Item |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| PPE |
22 |
22 |
27 |
28 |
28 |
| Associates & JVs |
789 |
792 |
849 |
927 |
935 |
| Long-term investments |
3,050 |
2,790 |
3,114 |
3,114 |
3,114 |
| Others |
289 |
290 |
262 |
274 |
274 |
| Total non-current assets |
4,150 |
3,895 |
4,251 |
4,343 |
4,352 |
| Development property |
321 |
414 |
241 |
258 |
258 |
| Accounts Receivables |
52 |
29 |
28 |
33 |
34 |
| Cash balance |
15 |
54 |
97 |
101 |
127 |
| Others |
21 |
0 |
0 |
0 |
0 |
| Total current assets |
408 |
500 |
367 |
392 |
418 |
| Total Assets |
4,558 |
4,395 |
4,618 |
4,735 |
4,770 |
Liabilities and Equity
| Item |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| Short term loans |
384 |
235 |
173 |
224 |
224 |
| Accounts Payables |
50 |
43 |
47 |
71 |
69 |
| Others |
67 |
36 |
43 |
43 |
43 |
| Total current liabilities |
501 |
313 |
263 |
338 |
336 |
| Long term loans |
1,195 |
1,111 |
1,181 |
1,195 |
1,195 |
| Others |
29 |
32 |
32 |
32 |
32 |
| Total non-current liabilities |
1,224 |
1,143 |
1,213 |
1,227 |
1,227 |
| Shareholder Equity |
2,820 |
2,925 |
3,128 |
3,156 |
3,207 |
| Non-controlling interest |
13 |
14 |
14 |
14 |
14 |
| Total Equity |
2,834 |
2,939 |
3,142 |
3,170 |
3,207 |
Valuation Ratios
| Ratio |
FY15 |
FY16 |
FY17 |
FY18e |
FY19e |
| P/E (X), adj. |
23.8 |
10.4 |
6.8 |
17.7 |
18.7 |
| P/B (X) |
0.5 |
0.5 |
0.5 |
0.5 |
0.5 |
| EV/EBITDA (X) |
24.7 |
20.4 |
22.2 |
16.4 |
13.8 |
| Dividend Yield (%) |
3.4% |
3.0% |
4.0% |
3.2% |
3.2% |
| Net Debt/(Cash) |
1,564 |
1,291 |
1,257 |
1,319 |
1,292 |
| Net Gearing (X) |
0.34 |
0.29 |
0.27 |
0.28 |
0.27 |
Valuation Method
- RNAV: Ho Bee Land's RNAV is S$2.829.4 million, translating to S$4.25 per share.
- Discount to RNAV: HBL is currently trading at a 30% discount to RNAV.
- Fair Value: The fair value is set at S$2.98, with the target price remaining unchanged.
Outlook and Investment Recommendation
- The recurring income portfolio is expected to remain stable.
- The company's undervalued high-end property portfolio is seen as a positive.
- Successful re-launch of Sentosa properties above the assumed S$1,500psf capital value could narrow the discount and lead to an upgrade in RNAV.
- Investment Recommendation: ACCUMULATE with an unchanged RNAV-derived target price of S$2.98.
- Price Performance: The stock has returned 12% over the last month, -19% over the last three months, and 9.9% over the last year.
- Market Cap: SGD 1,704 million.
- P/NAV: Below the post-GFC average of 0.63, indicating a steep discount.
Key Ratios and Growth
- Revenue Growth: -62.0% (FY15), +130.4% (FY16), -45.0% (FY17), +1.6% (FY18e), +1.1% (FY19e).
- EBITDA Margin: 91.0% (FY15), 43.4% (FY16), 80.7% (FY17), 61.5% (FY18e), 72.0% (FY19e).
- Net Profit Margin: 42.2% (FY15), 37.7% (FY16), 104.9% (FY17), 56.8% (FY18e), 53.4% (FY19e).
- ROE: 1.9% (FY15), 3.8% (FY16), 5.5% (FY17), 3.0% (FY18e), 2.8% (FY19e).
Contact Information
- Editor: Vaughn LI, Tel: (852) 2277 6628, Email: foreignstock@phillip.com.hk
- Research Analysts:
- Benny WANG, Tel: (852)2277 6720, Email: bennywang@phillip.com.hk
- ZHANG Jing, Tel: (86) 2151699400-103, Email: zhangjing@phillip.com.cn
- John WONG, Tel: (852) 2277 6527, Email: johnycwong@phillip.com.hk
- FAN Guohe, Tel: (86)2151699400-110, Email: fanguohe@phillip.com.cn
- WANG Yannan, Tel: (86) 2151699400-107, Email: wangyannan@phillip.com.cn
- Sales Managers:
Disclaimer
This publication is distributed in Hong Kong by Phillip Securities (Hong Kong) Limited, licensed by the Securities and Futures Commission. It is not intended to provide tailored investment advice and should not be construed as a solicitation to act as a securities broker or dealer. The information is based on sources believed to be accurate, and any analysis, forecasts, or opinions are expressions of belief only. Investors should seek financial advice before making any investment decisions.
