• 1Q17 PATMI up 4% YoY
• Three launches next year
• Downgrade to HOLD with unchanged FV

1Q17 Results Within Expectations

1Q17 PATMI rose marginally by 4% YoY to S$82.3m mainly due to higher profits from property development, lower expenses and stronger contributions from share of profits from associated and joint venture companies. In terms of the topline, 1Q17 group revenues rose 6% YoY as we saw higher progressive recognition from Principal Garden and Botanique at Bartley and office and retail rentals contributions from 110 High Holborn in London.

Over the quarter, revenue from hotel operations were mostly stable YoY at S$104.6m (versus S$104.9m previously) as the firmer numbers from the group’s hotels in Australia were offset by lower revenues from Parkroyal Penang due to ongoing refurbishments. We deem this set of results to be broadly within expectations and 1Q17 PATMI now constitutes 31% of our full year forecast.

Looking Ahead to Three Project Launches Next Year

The group continue to move units at its launched projects over the quarter; as at end 1Q17, the 505-unit Clementi Canopy development (50-50 JV with UIC) is 38% sold while the 663-unit Principal Garden development (70-30 JV with Kheng Long) is 55% sold. In China, the group has sold 132 units out of 168 units approved for release in the first phase of Park Eleven, Shanghai and, in London, management indicates that while the outlook for commercial property could be weighed down by economic uncertainties, the mixed-use Holborn Island and 110 High Holborn in Midtown could be mitigated by limited supply.

Looking ahead, the group is looking to launch three projects next year. There will be two launches in Singapore, comprising the freehold 45 Amber Road site (140 estimated units) and the 99-year leasehold Potong Pasir Ave 1 site (750 estimated units). There will be another site in London at Bishopgate which will consist of 160 estimated units.

Our fair value estimate remains unchanged at S$7.30 but given the strong performance of the share price to date, our rating is adjusted to HOLD (from buy previously) on valuation grounds.

Source: OCBC Research - 15 May 2017