Bumper revaluation gain from The Metropolis took FY13 headline PATMI to a record SGD591.8m, prompting a generous dividend of SGD 8.0 cts.

A lack of development sales saw FY13 core PATMI plunge by 86.0% YoY to SGD23.9m, but still above our estimate of SGD18.9m thanks in part to a tax write-back of SGD3.4m.

Ho Bee’s earnings profile will improve hereon with a stronger recurrent income base. Maintain BUY, TP lifted to SGD2.55.

What’s New

Ho Bee recorded a headline PATMI of SGD506.1m for 4Q13 on the back of a SGD489.6m revaluation gain from The Metropolis. Core PATMI stood at SGD13.0m (-75.2% YoY, +82.0% QoQ), which was sequentially stronger on the back of the tax write-back and increased rental income from The Metropolis in Singapore and Rose Court in London. The proposed dividend of SGD 8.0 cts translates into a fairly attractive yield of 3.7%.

What’s Our View

With Ho Bee’s Singapore landbank concentrated in Sentosa Cove, we do not expect much residential contribution in the near future given the softening market. Earnings from its investments in China and Australia will not feature in the near term as well, considering that the projects are in their early stages of construction.

Ho Bee’s recurrent income base has strengthened with the completion of The Metropolis, which is ~90% committed. Based on the latest valuations, the office development is valued at ~SGD1,300 psf, which we think is fair. However, if we peg it to the SGD1,900 psf valuation at which Westgate Tower was recently transacted, Ho Bee’s RNAV per share could be as high as SGD4.73.

Trading at 0.6x P/BV, valuation is attractive. Maintain BUY; TP of SGD2.55 pegged to a 35% discount to RNAV.

Source: Maybank Kim Eng Research - 28 Feb 2014