Ho Bee Investment

Kim Eng on 29 Feb 2012


Results in line. Ho Bee’s 4Q11 net profit of $67.1m was within our expectations, after excluding the $41.3m fair value gain from its investment properties. Full-year revenue and net profit came in at $341.5m and $202.5m, respectively. In view of the persistent slow sales in Sentosa Cove and the delayed launch of Pinnacle Collection, we keep our Hold recommendation unchanged.

Improved sales. Sales increased slightly in 4Q11, with a total of 16 units sold. Three units at The Orange Grove were sold at an average price of $2,180 psf; two units at Trilight were sold at an average price of $1,740 psf; two units at Seascape were sold at an average price of $2,750 psf and the remaining sales came from industrial units at One Pemimpin. Prices achieved were in line with our ASP assumptions. We understand that most sales were transacted before the Additional Buyer’s Stamp Duty took effect early last December and that there were no sales so far this year.

Unbilled sales. There remains an estimated $505.7m in unbilled sales from its substantially sold uncompleted projects – Trilight (95% sold), Parvis (100% sold) and One Pemimpin (96% sold). We estimate the unbilled sales would translate to approximately $90m in net profit, which will be progressively recognised in the next two years. Construction for its one-north office project, The Metropolis, is progressing as scheduled and will be completed by end-2013. Its low breakeven of $800 psf is cause for comfort, as offices in regional commercial hubs such as Paya Lebar Square are currently selling at $1,600-1,800 psf.

Valuation and recommendation. The RNAV is adjusted to $2.82 after rolling forward our valuations to FY12. Ho Bee declared a final dividend of 4 cents per share, translating to a dividend yield of 3.0%. Net gearing has been reduced to 27% from 45% a year ago. Its latest book value is $2.34/share. Maintain Hold.