Excerpts from UOB KH's report

Analysts: Edison Chen, Nicholas Leow & Yeo Hai Wei

Tuan Sing Holdings (TSH SP) Rides The Property Market With Prime Assets At Fire-sale Prices 

Property developer TSH offers a unique opportunity to ride the property upcycle with its enviable S$2.3b property portfolio, which includes prime Singapore freehold/999- year properties and key Australia hotel assets, at fire-sale prices.

We see RNAV expansion and yield pick-up with the redevelopment of 18 Robinson completed and sale/monetisation of non-core assets and property inventory unlocking value.

Initiate coverage with BUY and SOTP-based target price of S$0.71. 

Tuan Sing

Share price: 
45.5 c

71 c

♦ We initiate coverage on Tuan Sing Holdings.

Reputable property developer with multiple awards for corporate governance, architecture and hospitality. Listed in 1973, Tuan Sing Holdings (TSH) is a reputable property developer which has won multiple awards for corporate governance and transparency (Top 1.1% on 2016 Singapore Governance & Transparency Index, Most Transparent Company Award for Mainboard Small Caps; SIAS 2016) as well as architecture and hospitality.

Enviable S$2.3b property portfolio. TSH boasts a property portfolio worth S$2.3b, including properties in the prime districts in Singapore such as Robinson Road and Upper Bukit Timah. On top of that, TSH has a portfolio of prime freehold hospitality assets in Melbourne and Perth, Australia.

♦ Riding property upcycle at fire-sale prices. With en-bloc fever marking the beginning of Singapore’s property market upcycle and the onset of a recovery in Grade-A office rentals as the pipeline supply eases significantly, TSH is well positioned and offers investors an unique opportunity to ride the property upcycle at fire-sale prices. 

Completion of 18 Robinson redevelopment in 2H18 to see book-value gains and yield pick-up; Sime Darby to offer redevelopment potential. The redevelopment of 18 Robinson is expected to be completed in 2H18.

On top of revaluation gains, this could add a stable S$19.8m in annual rental income which could result in a pick-up in current yield. Going forward, Sime Darby Centre offers further redevelopment potential as the area gears towards being a healthcare medical hub.

Gul Tech Peer Valuation
Gul Tech fair value at 12.2x 2017F PE. Global printed circuit board (PCB) peers are trading at an average of 15.3x 2017F PE. As a key player in the global PCB market, TSH’s subsidiary Gul Technologies (Gul Tech) boasts customers across diverse fields including automobile, computer peripherals, consumer electronics, telecommunications, healthcare and instrument & control.

With strong growth opportunities in end-markets and Gul Tech’s focus on in-demand rigid-flex PCBs, a 20% discount to peers’ average of 15.3x 2017F PE is fair.

We project share of results of Gul Tech to grow at 7.5% CAGR in 2016-19. Since PCB is integral to mobiles and smart devices, the rise in demand for smart devices will augment demand for PCBs. In addition, advanced technologies such as the Internet-Of-Things (IoT) and wearables only point towards a long runway of growth. We project FY17’s share of results of Gul Tech to be S$16.0m.

Substantial value to be unlocked. With a book value of about S$77.9m or S$0.18/share, based on 44.5% of 931.1m Gul Tech shares, any potential divestment of Gul Tech at current market comparisons will unlock substantial shareholder value.

At 12.2x 2017F PE, we think valuations are not rich after taking into account the controlling stake any potential acquirer may seek.

Full report here.

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