• "Co-living" -- imagine multiple individuals (usually strangers) living together in a communal setting. In Singapore, co-living has picked up with LHN Limited emerging as the No.1 player.

LHN (market cap: S$141 million) manages and furnishes the spaces,
 providing a variety of amenities such as Wi-Fi and kitchens, and cleaning services and utilities.
 See video below for a better idea.



• LHN entered this business back in 2019 but has gained wider investor recognition only in recent times as analysts started to cover the stock. It looks like a high-growth business. 

• And it's in demand. LHN's co-living brand, Coliwoo, enjoyed 94.7% occupany as at September 2023, according to the company.

Below an investor shares his analysis of the business. 
LHN redesigns old or under-utilised spaces to maximise their lettable area and create conducive environments for the tenants.

The space optimisation business started in 2006 for industrial properties and extended to commercial properties the year after. 

Among the array of real estate management services LHN provides, co-living stands out.
  
 Co-living business -- the journey


LHN's coliving business, with "Coliwoo" as its brand, has a shorter history. 

Coliwoo OrchardIn August 2018 and March 2019, it leased from the Singapore Land Authority 31 Boon Lay Drive and 150 Cantonment Road respectively. 

After renovation, the first site now houses students and white-collar workers.  LHN renovated the second site, which served as the HQ of the Corrupt Practices Investigation Bureau, and subleased it to co-living operator Hmlet. 

A milestone was reached in December 2021 when OCBC granted LHN the right to operate 2 Mount Elizabeth Link for 15 years (initial 3 years plus four extensions of 3 years each).

Before LHN, the 72-apartment building was leased to Fraser Hospitality.

After extensive renovation, the first batch of Coliwoo Orchard's 411 living units was available for rent in February 2023.  

Coliwoo made its first acquisition in September 2020 for a property in Balestier.  In November 2020, a joint venture was formed to buy a pair of hotels at Amber Road for $27m.  In April 2023, the renovated hotels were sold for $46.6m.   

Coliwoo is Singapore's biggest co-living operator, with 1,681 keys by the end of September 2023, compared to 1,015 keys the year before.

Coliwoo's revenue of $28.26m for the financial year ended 30 September 2023 was 85% higher year-on-year.

In particular, 2H FY23's revenue surged 115% y-o-y (table below)


 (S$'m)

1H
FY22

2H
FY22

FY22

1H
FY23

2H
FY23

FY23

Revenue

7.00

8.27

15.27

10.47

17.79

28.26

Operating profit

3.51

4.87

8.38

4.44

10.26

14.70

Finance cost

0.52

1.00

1.52

1.74

2.38

4.12

Pre-tax profit

2.99

3.87

6.86

2.70

7.88

10.58



FY24 should be better with full-year contributions from Coliwoo Orchard (soft launch in February 2023) and Coliwoo 298 River Valley (opened in August 2023) as well as launches of several properties, such as Coliwoo Pasir Panjang.

 
Of the 1,681 keys as of 30 Sep 2023, 1,381 (83%) were from master leases. 

This is not surprising as ownership is costly -- for the 30 keys of Coliwoo Gay World 
after renovation, the $13.3m purchase cost of the old Geylang hotel translates into $ 0.45m per key. 

Growth has to be driven by new master leases.

The Health Ministry's plan to convert vacant buildings into hostels for foreign healthcare staff opens doors for co-living operators to expand. If the five sites of the pilot scheme are well-run, 11 will be added. 

LHN reported on 25 December 2023 that it has been appointed to design, retrofit, and operate two sites for around 700 foreign healthcare staff with two people sharing a room. 

When the lodging facilities are completed in the second half of this year, Coliwoo's portfolio will cross 2,000 keys.

 

 Asset recycling

 

kelvinlim3.18LHN's executive chairman, Kelvin Lim.
File photo
2023 saw three disposals.  

• In January, LHN's 20% stake in car rental firm GetGo Technologies, which was acquired in 2020 for a mere $128k, was sold for a whopping $7.9m. 

 

• In August, its 84% stake in listed LHN Logistics was sold for $31.9m for a gain of $18.2m.
 
• In April, the pair of hotels at Amber Road, which was bought for $27m under a joint venture in 2020, was sold for $46.6m.

 

 Turning around ailing businesses

 

LHN succeeded in nursing two ailing businesses to health. 

• In 2016, it partnered WSPL to buy out Four Star Mattress for less than $1m.

Since FY2020, Four Star's annual profits were multiples of the acquisition cost (table below).

 

S$’000

FY17

FY18

FY19

FY20

FY21

FY22

FY23

Revenue

2,202

3,432

6,968

8,364

12,600

20,496

25,866

Net profit*

909

(534)

997

2,066

2,152

7,399

5,113 

*excludes fair value change

 

• In February 2020, LHN partnered WFS to buy 202 Kallang Bahru for $17m from Ascendas REIT.  

The property is the former Hyflux Building. It was sold for $19m to Ascendas in 2005 under a sale-and-leaseback arrangement.

202 Kallang Bahru turned in a profit starting FY22 (table below).


(S’000)

FY20

FY21

FY22

FY23

Revenue

nil

149

2,654

4,685

Net Profit*

(540)

(992)

374

1,842

*excludes fair value change

 

 Food factory

55 Tuas South, an old industrial complex which 
LHN bought in October 2021 for $21m from a mortgage sale, is being converted into food production facilities. 

After completion in August, LHN expects a decent profit from selling the 49 units having a combined lettable area of 112,000 sq ft. 

 

By the way, Singapore-listed Powermatic Data Systems, which also thinks food factories are in demand, is tearing down its existing building in Macpherson for construction of food production facilities yielding some 70,000 sq ft of saleable space.

The project cost is $28m.  The company said in pg 11 of its
circular 
that food production space is sold between S$1,300 to S$2,100 per sq ft in Singapore.

 

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