Keeping up with competition. SingLand reported a 1Q13 core PATMI of SGD49.6m (-11% YoY, -17% QoQ), due mainly to lower contribution from The Trizon and in line with expectations. The recent announcement of the proposed new retail wing to be built at Marina Square will help to make the mall more relevant and enhance shareholders’ value. Downgrade to HOLD.

Rental income takes a dip. Despite a marginal improvement in 4Q12, SingLand’s gross rental income took a 4% QoQ dip to SGD57.8m in 1Q13 amid the competitive office leasing landscape. Further downside pressure is likely as SingLand may have to moderate asking rents in order to retain tenants. Gross profit from hotel operations also softened by -12% QoQ to SGD5.5m due to higher costs, despite the Pan Pacific Singapore having undergone a major refurbishment last year.

Marina Square makeover in two phases. Marina Square Shopping Mall, which SingLand has a 53.1% stake via Marina Centre Holdings, is currently undergoing AEI involving 50,000 sqft of space for a brand new gourmet dining zone set for completion in June 2013 and is already ~90% pre-committed. A new retail wing has been announced under Phase 2, where 200,000 sqft of retail space will be added at a cost of SGD80m, to be completed by 4Q14. Comprising three levels of shopping space and rooftop dining venues, we see this as a proactive move to ensure Marina Square stays relevant as it faces more intense competition from Suntec City Mall, which is currently undergoing extensive enhancements of its own.Valuing the new retail space at SGD2,200psf, we estimate an RNAV accretion of 4cts/share from this exercise.

Fair value reached. We raise our target price to SGD9.60, pegged to a slightly narrower 25% discount to RNAV (previously 30%) as we view the Marina Square makeover as a small but positive move to unlock shareholders’ value. In our view, a privatization by the substantial shareholders UIC at SingLand’s current PBR of 0.73x is unlikely. We downgrade SingLand to HOLD.

Source: Maybank Kim Eng Research - 29 Apr 2013