Stable and without surprise. SingLand reported a 3Q12 PATMI of SGD57.0m (+1% YoY, +35% QoQ) which was in line with expectations. The higher sequential earnings were mainly on the back of higher residential profits recognized. 9M12 PATMI of SGD159m is 71.3% of our full-year estimate, but we expect 4Q12 to be stronger with the reopening of Pan Pacific Singapore. Maintain HOLD.

Office segment showed mild negative rental reversion. SingLand's income from investment properties continued its marginal decline for the third consecutive quarter, falling by 1% QoQ. Management conceded that amidst the current economic slowdown and significant supply in the pipeline, the office leasing market is expected to remain competitive. For the hotel business, SingLand registered a SGD4.5m loss at the gross profit level for the Pan Pacific Singapore, which was closed for major renovation works from April to August 2012.

Beefing up residential landbank. As of end September, The Trizon was 91% sold, while Archipelago has shrugged off its initial slow sales and is now almost fully-sold. During the quarter, via a 50-50 JV with UOL, SingLand successfully tendered for a condo site at Bright Hill Drive for SGD291.5m, or SGD720 psf ppr. We are expecting an eventual ASP of SGD1,500 psf on a breakeven of SGD1,230 psf for a 6 cents/share RNAV accretion. Together with the Jervois Road and Farrer Drive sites, SingLand has a landbank with attributable GFA of 445,455 sq ft.

No compelling value proposition. We expect SingLand’s office portfolio to continue to face downward rental pressure in light of the upcoming supply and slow leasing market. Profit margins from the future residential launches also do not appear attractive enough to swing profits significantly upwards. Maintain HOLD, with a target price of SGD6.75, pegged at a 40%-discount to RNAV (previously 50%).

Source: Maybank Kim Eng Research - 05 Nov 2012