What is the news?

Favorable financial performance in 2Q13. Earnings results revealed a 2Q13 PATMI of S$2.1mn, 51.6% y-y increase, mainly attributed to higher revenue from property investment and development segment. Management has guided that there were no significant variance in revenue from the Hotel Investment and Management segment. Company continues to look towards overseas, hunting for profitable development projects, as exemplified by its April’13 signing of MOU for a potential business hotel development in Myanmar.

How do we view this?

Promising 2Q13 financial performance is sustainable for the foreseeable future. We expect revenue growth to be supported by the newly reopened 100am retail mall. Largely in line with our forecast, 1H13 revenue formed 36.0% of FY13 estimates. While 1H13 PATMI accounts for a mere 21.2% of FY13 estimates, the traditionally stronger second half financial performance should make up for it. We remain positive as current RNAV-valuations are still cheap.

Investment Actions?

With fundamentals intact, strong recurring income is expected. Expect their hotel to weather the upcoming supply glut. Fair value at $0.74 previously. Maintain Buy.

Source: PhillipCapital Research - 15 Aug 2013