Excerpts from DBS Group research report

Analysts: Wong Bing Yong & Derek Tan

What's New

• RMB435m GulTech stake sale marks another step to 
unlock value

Tuan Sing 

Share price: 
$0.405

Target: 
$0.54

• Potential GulTech IPO could almost double Tuan Sing's market cap in theory

• Office and hotel business fundamentals improving

• Maintain BUY with higher TP of $0.54

TuanSing spin5.21

Crystallising hidden gold (Gul)

Investment Thesis:
Undervalued play.
We continue to see good value in the stock even as its P/NAV nears +1SD from its 3-year historical mean.

Apart from improved office fundamentals and the upcoming launch of projects in Opus Bay, the potential IPO of GulTech could further unlock value for shareholders.

GulTech's peers notably trade at an average historical PE of c.29%, a significant premium over GulTech's c. 12x historical PE valuation in the stake sale to the private equity partners.

Transformation into partial tech play in progress. GulTech's earnings have grown by a CAGR of 17.7% in the past five years.

While Tuan Sing's effective interest in GulTech Jiangsu will fall to an estimated c.39% after the divestment to the private equity partners, GulTech's earnings growth may accelerate with help from its partners.

Resilient property market. The Singapore private property market has held up well amid the pandemic, and a successful sales launch of Peak Residences could catalyse share price.

Valuation:
Our TP of S$0.54 is based on SOTP. We assume a valuation of 11.0x FY21F PE for GulTech, a 60% discount to RNAV of S$971.2m, and a further 10% conglomerate discount.

Our TP represents a P/BV of 0.55x compared to 0.41x currently (between mean and +1 SD of its 3-year mean of 0.37x) and peers' 0.51x.


Where we differ:
We are the only broker covering the counter. That said, we have assumed more conservative earnings growth for GulTech in FY21F.

Key Risks to Our View:
Resurgence of COVID-19 infections could lead to construction delays, factory and hotel disruptions, FX risk, soft office market, termination of Robinson Point sale.


Share Prices

Counter NameLastChange
AEM Holdings4.940-0.120
Avarga0.265-0.005
Avi-Tech Electronics0.000-
China Sunsine0.4800.005
Food Empire0.735-0.005
Fortress Minerals0.440-0.010
Geo Energy Res0.3550.025
Golden Energy0.3000.010
GSS Energy0.068-
InnoTek0.750-
ISDN Holdings0.675-0.010
ISOTeam0.112-0.007
IX Biopharma0.198-0.001
Jiutian Chemical0.0860.003
KSH Holdings0.350-
Leader Env0.069-
Medtecs Intl0.315-
Moya Asia0.063-
Nordic Group0.405-
Oxley Holdings0.185-
REX International0.320-0.010
Riverstone0.685-0.015
Sinostar PEC0.285-0.005
Southern Alliance Mining0.700-0.005
Sri Trang Agro1.190-0.010
Straco Corp.0.415-0.005
Sunpower Group0.465-0.010
The Trendlines0.1080.001
Totm Technologies0.189-0.001
UG Healthcare0.285-
Uni-Asia Group1.070-0.030
Wilmar Intl4.3500.010
Yangzijiang Shipbldg1.320-0.020

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