Excerpts from UOB Kay Hian report

Analysts: Peihao Loke & Nicola Ho

Singapore Residential to sell-out by end-20. To-date, the group has sold over 2,410 units (c.61%) of its 3,923 units Singapore inventory (inclusive of commercial units).

Interestingly, management also observed a surge in investor appetite from Hong Kong buyers (with increased uptake in certain projects, like Mayfair Gardens/Modern in Singapore and the Royal Wharf in the UK), amid unrest in HK region.

-- UOB Kay Hian

Three of the projects (incl. The Verandah Residences, Sixteen35 Residences, Sea Pavilion Residences) are 100% sold.

Other projects, such as Riverfront Residences (74%), Affinity @ Serangoon (55%), Mayfair Gardens/Modern (50%), and The Addition (88%) have also crossed cumulative sales marker of 30-40% (ie the level where most projects become self-financing).

Management expects sales to reach 70% of the total by end-19, and sell out the remaining within 12-15 months.



Oxley

Share price: 
30 c

Target: 
64 c

Interestingly, management also observed a surge in investor appetite from Hong Kong buyers (with increased uptake in certain projects, like Mayfair Gardens/Modern in Singapore and the Royal Wharf in the UK), amid unrest in HK region.

• Uplift from Draft Master Plan 2019. Management expects the recently-announced Draft Master Plan 2019 to inject new investment and selling angle to Singapore projects.

The Mayfair project is only a five minutes’ walk from the Future Integrated Transport Hub and Nature attractions (eg Rifle Range Nature Park, and Rail Corridor).

Its Riverfront project is expected to benefit from the relocation of Paya Lebar Airbase (from 2030 onwards) and construction of Thomson-East Coast (TEL) and Cross Island Line (CCL). The Affinity project is also located four minutes away from the upcoming Serangoon North Station on the Cross Island line.

• Net gearing declined to 2.05x (-44ppt qoq), on disposal of Chevron House and part of Dublin Landings. As a recap, the group entered into an S&P agreement with US-based AEW, which saw the buyer purchase the property (via entire interest in Oxley Beryl and takeover existing loans) for S$1.025b on 29 Apr 19.

ching eric2.17Executive chairman Ching Chiat Kwong and Deputy CEO Eric Low. NextInsight file photoAs part of first completion (on 7 Jun 19), the group has received a sum of S$210m (ie before netting S$41.4m retention amount for AEI works), in exchange for 82.35% of shares to the buyer.

Currently, the group holds 17.65% of Chevron House (also known as 30 Raffles Place).

On Dublin Landings, during FY19, the group signed contracts to sell two commercial buildings for €204m and part of the residential development for €154.6m (which the group will share 79.5% and 84% of the proceeds respectively).

Their sales will also be completed on practical completions of the building, which will take place progressively from end-19 to mid-20.

The group still has S$3.9b (Singapore: S$2.2b/Overseas: S$1.7b) in future progress billings, implying more cash inflows which can pare down debt levels in the coming quarters.

This puts the group on good stead in the reduction of its borrowings and puts them in a good position to make the future bond payment.


• Group’s hotels on Stevens Road performed well; RevPAR improvement (+29.2%yoy) vs FY18. Revenue and gross operating profit increased by 113% and 277% yoy respectively in FY19, as a result of better operating performance and a full-operating year in FY19.

Management noted that overall tourist arrivals to Singapore, mid-tier hotels’ occupancy, ADR and RevPAR in 1H19 were comparable to 1H18’s, based on STB statistics. They expect tourism demand to grow steadily in the Asia-Pacific region, which will benefit the group’s hotels on Stevens Road.

• Outlook on Singapore and Overseas property markets. Management is optimistic albeit prudent with regard to new home purchases as it was reported that private property prices in Singapore rose 1.5% in 2Q19 (vs 1.7% decline in 1Q19), despite the lingering effect of the cooling measures in 2018.

Private home sales registered a 43.5% increase to 1,174 units in July compared to the prior month, showing signs that sales momentum may remain healthy amid macroeconomic headwinds.

On the overseas markets, they noted that Brexit uncertainties have impacted property prices in London (although Dublin in Ireland stands to gain, as investors express growing interest in the city’s commercial and residential properties).

RECOMMENDATION
• Maintain BUY with unchanged target price of S$0.64, pegged at 30% discount to our RNAV of S$0.92.




Full report here.


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