Respectable third quarter. Ho Bee posted a 3Q12 PATMI of SGD31.5m (-3% YoY; -57% QoQ), mainly on the back of profits from Trilight and Parvis, largely in line with expectations. What stood out was that Ho Bee managed to sell the remaining eleven units at The Orange Grove subsequently in 4Q12. Maintain BUY.

The Orange Grove is now sold-out. Even as recent as at end-Sep, there were eleven unsold units at the 72-unit The Orange Grove, which had obtained its TOP in 2010. Ho Bee has since sold the remaining units in 4Q12, which we expect to yield net profit of ~SGD14m to be recognized in the quarter. Earnings in 4Q12 will also be underpinned by recognition from Trilight, which obtained its TOP in October 2012.

Taking cues from Sentosa Cove. While Ho Bee has not been selling units from its Sentosa Cove projects, there appears to be some activity in the secondary market there. Resale transactions at the Cove have come off a low of just three units in 1Q12 following the introduction of the Additional Buyer’s Stamp Duty in Dec 2011 to twenty-one units transacted in both 2Q12 and 3Q12 each, suggesting that demand there is not completely dead. We expect Ho Bee to step up marketing efforts to sell the remaining 104 units at Seascape in FY13.

Buzz over The Metropolis. The Metropolis, with 1 million sq ft of office space, is expected to be completed by 2H13. There have been reports suggesting various companies interested in taking up space there, such as Neptune Orient Lines purportedly seeking to lease over 100,000 sq ft, after recently agreeing to sell the NOL Building. Proctor & Gamble had been named as potentially being the biggest tenant, possibly taking up > 200,000 sq ft of space. On a stabilized basis, we estimate that The Metropolis can contribute ~SGD48m in net property income per annum.

Maintain BUY. We raise our target price to SGD1.95, pegged at a 40% discount to RNAV as we incorporate an estimated development surplus on The Metropolis. Trading at 0.6x P/B and 0.46x P/RNAV, valuations remain very attractive.

Source: Maybank Kim Eng Research - 08 Nov 2012