• Neglected proxy to hospitality upcycle
• Undemanding valuations
• FV at S$4.74

FY17 Core PATMI Increased 52.8% YoY

FY17 revenue increased 14.1% YoY to S$659.2m, mainly attributable to the sale of Tomlinson Heights units as well as better performance from the group’s hospitality segment. Correspondingly, gross profit increased 19.8% YoY to S$169.6m. Share of results of associates and jointly controlled entities increased from S$34.7m in FY16 to S$128.9m in FY17, mainly due to profits from the Burlington Gate and Holland Park Villas in London which completed development this year.

The increase in gross profit as well as the contributions from associates and JVs translated into a 52.8% higher core PATMI of S$161.7m. HPL declared 4 S cents for its first and final dividend, and an additional 6 S cents for a special dividend. This translates to an FY17 dividend yield of 2.7% against yesterday’s closing price of S$3.74. As of end-FY17, the group’s NAV stands at S$3.71 per ordinary share, up from S$3.45 as at end-FY16.

Positive Operational Outlook for Both Segments

We believe Singapore is at the early stage of a rebound in the domestic hospitality market and see the pick-up in global economic growth as a boon for luxury hotels and resorts around the world. We see HPL as a proxy to these growth drivers with its sizeable hotel portfolio. The group’s hospitality assets, captured under PPE in the balance sheet, are valued at a blended cap rate of ~5.4%, which we continue to find attractive given that a substantial portion of the assets are either freehold or long leasehold.

For the property segment, we look forward to contributions from the sale of remaining units at Burlington Gate and Holland Park Villas, which the group has a 65% and 50% interest in, respectively. With a change in covering analyst, our fair value decreases 3% from S$4.83 to S$4.74 as we update our model.

HPL is currently trading at a ~20% discount to our RNAV, which we find undemanding relative to its hospitality peers. We maintain BUY on HPL.

Source: OCBC Research - 28 Feb 2018