No earnings surprises. SingLand’s 3Q13 core PATMI of SGD49.4m (+2% QoQ; -13% YoY) was within expectations. A dip in profit from the development of residential property was offset by improved hotel income. Barring a privatisation attempt by substantial shareholder UIC, we see few positive near-term catalysts. Maintain HOLD.

Recurrent income base shows resilience. Gross rental income from SingLand’s investment properties edged up slightly by 3% QoQ and 2% YoY to SGD59.4m, stemming two quarters of marginal decline. Revenue from Pan Pacific Singapore improved steadily to SGD29.4m in 3Q13 (+10% QoQ, +276% YoY), since reopening in Sep 2012 after five months of renovation.

Recent residential launches received mixed response. Since its launch in April 2013, SingLand has managed to sell merely 27 units at Mon Jervois (total 109 units) at an ASP of ~SGD2,000 psf. Its JV project with UOL, Thomson Three, was better-received, achieving a sell-through rate of 83% when 320 units were launched in Sep. The project was priced to sell, with the ASP of SGD1,350 psf being 10% lower than our initial estimate. However, we estimate the project still yields a pre-tax margin of ~18%.

Next up, Alex Residences. We understand that SingLand will be previewing its next project, Alex Residences at Alexandra Road, over the weekend. Based on the marketing materials, nearly half of the 429 units at Alex Residences are less than 700 sq ft in size, with the remaining three-bedders no bigger than 1,141 sq ft. Evidently, SingLand has designed the units to keep absolute prices affordable. We expect the project’s ASP to be ~SGD1,750 psf, implying a 19% pre tax margin on an estimated breakeven of SGD1,390 psf.

Maintain HOLD. We see few positive catalysts for SingLand at this point. Its residential projects are not significantly RNAV-accretive (SGD0.14 per share) and we think its recurrent income is likely to remain flattish going into FY14, especially as management sees slowing visitor growth and a tight labour market as the near-term challenges. We trim our TP to SGD9.08 pegged to a slightly steeper 30% discount (previously 25%) to FY14 RNAV

Source: Maybank Kim Eng Research - 4 Nov 2013