"Outter" -- formerly an equity analyst in a bank -- contributed this article to NextInsight as a follow-up to his article SING HOLDINGS: Deep Value Property Play with Imminent Catalyst
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SING HOLDINGS: Parc Botannia Preview - Strong Pricing Reflects Developer’s Confidence
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In our view, SHL has positioned the Parc Botannia project to capitalize on the positive sentiment in property sector.
The strong pricing reflects the developer’s confidence in the project and the Singapore residential property market. We raise our present value estimate for Parc Botannia to reflect the higher ASP and lift SHL’s RNAV to $0.98, and fair value to $0.78 accordingly.
Additionally, we see upside to our RNAV/fair value forecast as the next catalyst unfolds on 11 Nov 2017, the official launch date of Parc Botannia.
Higher RNAV on Better ASP in Parc Botannia
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Book value |
RNAV |
Comments |
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Investment property-Travelodge |
120 |
120 |
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Development properties- |
315 |
431 |
ASP $1,265 psf |
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Completed properties |
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-Biz Tech |
26 |
46 |
marked to mkt 950 psf |
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-Robin Residence |
52 |
48 |
fully sold with $4mn loss |
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Others |
24 |
24 |
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Cash |
60 |
60 |
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Total assets |
597 |
729 |
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Bank loans |
291 |
291 |
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Others |
46 |
46 |
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Total Liabilities |
337 |
337 |
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Shareholders' Equity |
260 |
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RNAV |
392 |
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No of shares (mn) |
401 |
401 |
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RNAV Per share-S$ |
0.65 |
0.98 |
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Stock price |
0.50 |
0.50 |
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Discount |
23% |
49% |
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Parc Botannia Present Value Estimates |
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Total land costs -$mn |
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287 |
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Saleable area-sq ft |
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560,000 |
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Price psf ppr-$ |
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517 |
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Development costs-$/psf ppr |
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280 |
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ASP-S$ psf |
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1,265 |
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Development margin-$/psf |
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468 |
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Development margin-% |
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37% |
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Total development profit-$mn |
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262 |
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Less expense & taxes-$mn |
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52 |
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Net profit-$mn |
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210 |
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SHL share @ 70% - $mn |
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147 |
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Present value - $mn |
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116 |
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No of shares-mn |
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401 |
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Present value per share-$ |
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0.29 |
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Source: Company data, Discount rate: 10% |
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Higher-than-expected ASP: Based on the early bird price guide for the preview, a unit in Parc Bontannia starts from $548,000 for the smallest 1-bedroom unit (Type 1BR). The largest 5-bedroom (Type 5BR) unit starts at $1.6mn. 
Lee Sze Hao, CEO of Sing Holdings, with a portrait of his father, Lee Fee Huang, the founder of the company.
NextInsight file photoBased on our calculation, the gross development value (GDV) of Parc Botannia could reach roughly $670mn, under the minimum pricing scenario, and imply an ASP of approximately $1,196 psf.
As all of us know, the starting price is usually reserved for units on the lowest floor. Assuming an additional $5,000-8,000 per unit as we move up each floor, the maximum price for the 1BR unit could reach $653,000-716,000.
In this scenario, the GDV could reach $747mn, 16% higher than our previous forecast of $644mn. A more realistic case would be the midpoint, with GDV at around $708mn, 10% above our estimate, which translates into an ASP of $1,265 psf.
Unit Pricing and GDV Computation
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Price per unit-$ |
Gross Development Value -$ mn |
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Type |
Size-sq ft |
No. of units |
Min |
Average |
Max |
Min |
Average |
Max |
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1BR |
430 |
67 |
548,000 |
600,500 |
653,000 |
36.7 |
40.2 |
43.8 |
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1+S |
506 |
126 |
633,300 |
685,800 |
738,300 |
79.8 |
86.4 |
93.0 |
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2BR-C |
581 |
83 |
738,000 |
790,500 |
843,000 |
61.3 |
65.6 |
70.0 |
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2BR-P |
667 |
123 |
820,000 |
872,500 |
925,000 |
100.9 |
107.3 |
113.8 |
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2+S |
775 |
63 |
937,000 |
989,500 |
1,042,000 |
59.0 |
62.3 |
65.6 |
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3BR-C |
870 |
84 |
1,040,000 |
1,092,500 |
1,145,000 |
87.4 |
91.8 |
96.2 |
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3BR-P |
969 |
105 |
1,170,000 |
1,222,500 |
1,275,000 |
122.9 |
128.4 |
133.9 |
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4BR-C |
1152 |
21 |
1,300,000 |
1,352,500 |
1,405,000 |
27.3 |
28.4 |
29.5 |
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4BR-P |
1280 |
42 |
1,450,000 |
1,502,500 |
1,555,000 |
60.9 |
63.1 |
65.3 |
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5BR |
1453 |
21 |
1,600,000 |
1,652,500 |
1,705,000 |
33.6 |
34.7 |
35.8 |
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Total |
735 |
670 |
708 |
747 |
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Implied ASP-$/psf |
1,196 |
1,265 |
1,334 |
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Size refers to the minimum for each unit type. We calculated the maximum price and GDV assuming the minimum size for each unit.
Source: Company data
Unit PSF were mostly higher than our estimates
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Price per sq foot- $/psf |
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Type |
Min |
Average |
Max |
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1BR |
1274 |
1397 |
1519 |
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1+S |
1252 |
1355 |
1459 |
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2BR-C |
1270 |
1361 |
1451 |
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2BR-P |
1229 |
1308 |
1387 |
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2+S |
1209 |
1277 |
1345 |
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3BR-C |
1195 |
1256 |
1316 |
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3BR-P |
1207 |
1262 |
1316 |
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4BR-C |
1128 |
1174 |
1220 |
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4BR-P |
1133 |
1174 |
1215 |
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5BR |
1101 |
1137 |
1173 |
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We calculated the price per square foot assuming the minimum size for each unit. |
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Raising forecast and fair value: We incorporate the higher ASP of $1,265 psf, derived from the midpoint GDV scenario, into our Parc Botannia model. Accordingly, we raise our present value estimate on Parc Botannia to $0.29/sh from $0.22/sh.
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Priced to capitalizing on the rising market: Prices and units types are set to capture the targeted buyers. For example, the starting price for small size units, 1 and 2 bedroom, are kept below $1mn, to make them attractive to investors. The larger size 3 bedroom units are priced below $1.2mn, to make them affordable to young couples and family, looking to buy a private property.
The 4 and 5 bedroom units are aimed at established families looking for more space and comfort. Finally, the units are fitted with branded appliances and fine finishes which offer value to the buyers.
A sellers’ market: While there were no sales, the well-attended preview suggest strong interest for the project. According to property agents, the units will be balloted on the launch date, 11 Nov. Potential buyers need to register their interest by handing over a cheque to their agents.
This arrangement reflects a sellers’ market, in our view. We estimate that every $100 psf increase in ASP could raise SHL share of the net profit by $45mn and its fair value by roughly $0.05 per share. Upside risk could come from more aggressive pricing by the developer to maximize the sale.
About the event: The preview was well organized. Ushers showed visitors to the viewing areas and showflats. Valet parking service was provided. The sales gallery was fully occupied during our visit. Property agents from Huttons were patient and took the time to explain the positive attributes of Parc Botannia, such as the location, accessibility and facilities. An agent also highlighted to us the potential developments in the vicinity, such as educational institutions and emerging industries in the Seletar Regional Centre, which would enhance the future value of Parc Botannia.
Risks: Lower housing demand leading to weaker sales.
Disclaimer: This report is strictly for information purpose only. It does not contain any investment, financial, tax, legal or insurance advice; you should always seek such advice from professionals who are qualified, licensed and regulated in the respective relevant field. Do your own due diligence before undertaking any investment.
Watch this fly-through video of Parc Botannia -->
