SBF Centre – Next price catalyst. FEOR has recently sold 113 out of 138 office units released (total 192 units) at SBF centre (20% stake) with prices starting from SGD3,200 psf. Given the strong sales momentum in strata commercial space lately (Alexander Central, Paya Lebar Square, PS100 etc.), this is within expectation. 65% of the office buyers are companies, entrepreneurs and professionals offering services spanning trading, legal services, consulting and secretarial services, and financial advisory. The Singapore Business Federation (SBF) will be a major occupier in the development, though the amount of space it will take, and whether it will lease or purchase the space, is yet to be announced. The whole-floor office units have also not been released, but pricing (psf basis) is expected to be higher given the superior views they offer.

Mediplex@SBF. On the medical suite front, 27 of the 48 suites have been sold. Prices for medical suites, which are located at levels 3 to 5, start from SGD3,800 psf. This represents a favorable price, although the SBF Centre is not within walking distance to any medical hospital. Previous 2012 transactions at Parkway Novena (Mount E Novena), Novena Medical Centre and Novena Specialist Centre were contracted at SGD3,700-SGD4,201 psf. FEOR believes that medical services have yet to make inroads into this high-density urban centre. Far East Organization (FEO) and FEOR won the site in Sep 2012 with a bid of SGD311m (SGD882 psf ppr)

F&B outlets interest. There is also intense interest from potential buyers in the F&B outlets and alfresco dining areas on the ground floor. We think prices could fetch north of SGD5,000 psf. Nonetheless, the developer is considering holding these back and offering them for lease so that it can control the choice of F&B tenants and draw traffic to the area.

Investment thesis intact. We continue to like FEOR for the following reasons: (1) Possible synergies with its parent - Far East Organisation (FEO), who is Singapore's largest private developer (built 1-in-6 private homes in SG) with purportedly the largest onshore asset and land bank (~80m sqft) [Note: FEO sold the most number of dwelling units in 2012] (2) Clear focus post-restructuring, with emphasis on residential development (24% GAV), healthcare (21% GAV) and hospitality management (22% GAV). (3) FEO will inject future healthcare assets into FEOR, which we expect to benefit from rising medical tourism. (4) Undervalued in our view, with net cash already at SGD1.11. Reiterate BUY with an attractive SOTP valuation of SGD2.50.

Source: Maybank Kim Eng Research - 15 Mar 2013