Excerpts from DBS report

Analysts: Woon Bing Yong & Derek Tan

Raising TP as Gultech IPO progresses

INVESTMENT THESIS
Key Arguments:

• Potential IPO of GulTech to crystallise hidden value.

Tuan Sing 

Share price: 
$0.46

Target: 
$0.66

Since our initiation back in June 2020, Tuan Sing’s share price has risen 132% and we still see upside with a few catalysts ahead.

The sale of a stake in GulTech to strategic partners is projected to bring in substantial returns while sales at its residential projects could deleverage its balance sheet to a more conservative 0.6x by FY22, in our estimates.

As the potential IPO nears, we raise our TP to S$0.66 as we repeg our valuation multiple for GulTech to 16x FY22F PE, still a conservative valuation considering GulTech’s peers trade at over 20x FY22F PE.

PCB gultech• 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.38% after the divestment to the strategic 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 Residence could catalyse share price.

SOTP Valuation
Our SOTP share price of S$0.66 was based on a combination of RNAV valuation and relative valuation.