Wednesday, October 18, 2017

Recent Action - Ho Bee Land

I initiated another small position im another developer, this time Ho Bee Land for 10,000 shares at $2.51.

Some of you may have recalled that I used to own this company in the past (See Here) which I have since divested so it is not a company which I am not unfamiliar.

In any case, I have re-initiate the position for another short-term momentum play given how aggressive the developers are in the market these days doing their restocking of their land bank.


I'll put down some of my thoughts in the summary below:


  • Recurring Income Stream of prospective $150m
Hobee recurring income stream is extremely strong with its crown jewel Metropolis with its 100% occupancy contributing 60% of the total recurring income stream at about $85m. With some undergoing rental reversion this year and the positiveness in the commercial sector ticking up, I am expecting another positive rental reversion in this one.


The company also owns 6 investment properties in the UK:


- 1 St Martin Le Grand
- 60 St Martin's Lane
- 39 Victoria Street
- 110 Park Street
- Apollo & Lunar House
- Lombard Street


You might have recalled that the company divested Rose Park earlier this year at a 41% divestment gain and recently bought the Lombard Street at around 5% cap rate.


The investment properties in the UK is expected to bring in a full year recurring income stream of about $65m, or 40% of the total rental income.


  • GBP Strengthening against the SGD
The company has a natural hedge against the currency as it incurred its debt in GBP.

While this is a non-cashflow item, still the strengthening of the GBP against SGD will increase the value of it's NAV since the company will not incur translation losses in its comprehensive income.

Since the brexit low of 1.70, the exchange rate has risen close to 1.80 as of today writing.




  • Overseas Venture Project


The overseas venture project is the one which I used to have concerns in the past, especially after seeing its China JV write down impairments a couple of years ago for its Tangshan properties which they co-owned a 50% stake. Thankfully, the trend has been reversed as the company recognized profits from its China projects in its 1HFY17, mainly from the sales of their development in Yanlord Western Gardens which to date is 70% sold. The Tangshan development is also starting to sell with to date 30% sold.


The Australia project in The Pearl in Melbourne and Rhapsody in Gold Coast have almost been fully recognized in the book already.


  • Singapore Sentosa Properties
This is the big key re-driver in my opinion given how the company impaired its Sentosa properties last year with a huge $36.5m in their book.

Given how aggressively UOL has bidded for landbank Nanak Mansions recently as well as CDL in its Amber Park, the URA PPI index is showing a bottoming in the Q2 of this year. We might well see the start of another property boom in the market.

The company's properties in Turquoise, Seascape and Cape Royale are not worth that much in the book at about 26 cents, but if they can sell out, it might be worth noting if Mr. Chua is turning his strategies again in the local market sector.

For the moment, it does look like he is focusing his strategies in the UK where he sees better opportunity.


  • Market Depth Volume shows decreasing sell queues
This is something which I've been monitoring for a while.

The sell queues seem to be decreasing and it is well absorbed by the buyers so far. Still, being a rather low number of floating shares in the market, it is not easy to follow big brothers UOL and CDL.

The company share price hits an all time high of $2.55 back during the 2007 boom. It'll be interesting to see if they can break their all time resistance.

  • Dividends Yield Not Great But Sustainable
The dividend yield is nothing to shout about and is not my primary objective for buying the shares.


Still, knowing that they payout around 5 to 6 cents dividend, which amounts to about $34m, the company can well afford the dividends.


Summary


Like mentioned in the beginning, the probability swings on the momentum given how developers are leading the pack. It is worth taking a bit of risk for the much bigger upside reward that these companies might present.

They have been undervalued for a long time, this year might be their time to give it all up.







4 comments:

  1. Hi,

    Just wondering where do you get impairment of 36.5m for their sentosa properties? Is not in the AR ?

    Also the reason you divest earlier is due to the uncertainty of Brexit ? i mean brexit is now only in the earlier stage and might be a key risk moving forward.

    ReplyDelete
    Replies
    1. Hi Darren

      Not the latest AR you see, try the year before, think they impaired it early 2016.

      The reason for buying again this time is more on momentum play with gbp rising back and the investment properties in UK maturing and will get a huge boost to their revalued amount.

      I think overall we are at a much buller stage at this time than the last time I sold, so just capturing some opportunity on momentum side while I still see some upside.

      Delete
  2. Hi B, based on the price of 2.49, what is the current dividend yield for Ho Bee Land?

    ReplyDelete
    Replies
    1. Hi SR

      The yield should be just about 5 or 6 cents. Not for yield play.

      Delete

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