ROXY-PACIFIC, LIAN BENG: What analysts now say....

Artist's impression of Everitt Building, to be launched soon, after its makeover. It will be known as WIS @ Changi, have 'green' features and new facilities such as a swimming pool at the top level. By the way, WIS stands for Work in Style. Image: Roxy-Pacific

Excerpts from latest analyst reports.....

OCBC upgrades ROXY-PACIFIC to 'buy', its hotel alone exceeds market cap

Analyst: Eli Lee

At the current market cap of S$248m, Roxy Pacific Holdings is trading less than the independent valuation of its hotel asset alone (Grand Mercure Roxy Hotel “GMRH”), which is S$329m or S$590K per room – a fair valuation in the current hospitality market, in our view. Excluding GMRH, there is still an additional net equity of S$115m on its balance sheet.

Moreover, we see little chance of a liquidity crisis, even in a bear scenario, as ~56% of its debt is secured on sold-out projects and the remaining on land sites. 

Everitt Building now: A five-storey commercial building in Joo Chiat. Photo: Roxy-Pacific

Expect three more launches in 4Q11. Despite recent macro uncertainties, we expect ROXY to launch three more projects in 4Q11.

Everitt Building at 116 Changi Rd is expected to launch soon, with New Changi Hotel (80 Changi Rd) and Singapura Theatre (55 Changi Rd) to follow in Dec 11.

All three projects are slated for strata-titled sales, and we expect launch performances to drive share price performance over 4Q11-1Q12.

Given macro uncertainties ahead, residential prices and sales volume would likely weaken in 2H11 but prices are unlikely to collapse significantly due to continued low interest rates and healthy liquidity.

We believe there is compelling value and a significant margin of safety at the current ROXY share price. Upgrade to BUY with a fair value estimate of S$0.48 (30% discount to RNAV).

Recent story: ROXY-PACIFIC: 1H net profit up 14%, blip in revenue contribution from property development

DMG says LIAN BENG can trade up to 71 cents

Analysts: Selena Leong and Terence Wong, CFA

Ong Pang Aik, chairman, Lian Beng. Photo: Leong Chan Teik

Lian Beng Group (LBG) announced that it would be listing two of its subsidiaries on the Taiwan Stock Exchange. We estimate the listing to take place six to nine months from now.

With S$149.9m cash on hand (excluding the potential IPO proceeds), LBG is well positioned to accumulate land bank for property development.

Trading at a mere 3.4x prospective P/E, we believe it has the capacity to trade up to the sector average of 7x for a TP of S$0.71. Maintain BUY.

Rationale for listing. The proposed listing will provide greater clarity for credit profiling for financial institutions which wish to lend against the credit of the engineering and concrete business. In addition, it will enable its engineering and concrete business to fund its own growth.

Taiwan’s concrete peers are trading at an average of 12.9x current year earnings, while the engineering/construction peers are trading at an average of 7.8x. This implies a blended 10.4x prospective earnings, which implies IPO proceeds of ~S$28m based on FY11 earnings of ~S$9m for its two subsidiaries in FY11.

Attractively valued at 3.4x FY12 P/E. On the back of strong order books of S$839m (as at May 11) and a good track record of project wins, we estimate LBG’s FY12 earnings to come in at S$53.5m, which suggests a prospective P/E of 3.4x. Maintain BUY.

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