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 Holdings3.6700.040
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Avi-Tech Electronics0.410-
BH Global0.335-
China Sunsine0.520-
Food Empire0.880-
Fortress Minerals0.6450.010
Golden Energy0.255-0.005
GSS Energy0.0730.001
InnoTek0.925-0.005
ISDN Holdings0.635-
ISOTeam0.137-
IX Biopharma0.245-0.005
KSH Holdings0.375-0.005
Leader Env0.1140.001
Medtecs Intl0.925-0.015
Moya Asia0.068-0.001
Nordic Group0.340-
Oxley Holdings0.235-
Procurri0.3200.010
REX International0.185-0.004
Riverstone1.350-
Roxy-Pacific0.360-
Southern Alliance Mining0.950-0.010
Sri Trang Agro1.700-0.010
Straco Corp.0.5550.005
Sunpower Group0.8400.015
The Trendlines0.1060.001
UG Healthcare0.605-
Uni-Asia Group0.830-
Wilmar Intl4.6000.060
Yangzijiang Shipbldg1.380-
Yinda Infocomm0.2950.005

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