• Deep value play. We initiate coverage on Tuan Sing (SGX:T24) with a BUY.
• Attractive valuation at 0.27x P/NAV or -2 SD of 5-year mean.
• Australian hotel business set to recover with relaxation of COVID-19 measures.
• Potential value unlocking of Gultech to transform counter into partial tech play.

Tuan Sing - Company Background

Corporate History.

• Tuan Sing Holdings Limited (SGX:T24) is a Singapore-based investment holding company with core interests in property development, property investment and hotel ownership. The Group’s real estate businesses are mainly focused in the key Asia Pacific markets of Singapore, China, Indonesia and Australia. The Group also has interests in PCB manufacturing, commodity trading and production of polypropylene packaging bags.
• Tuan Sing’s property segment is involved in the development of properties in Singapore, China and Indonesia. Properties that have been or are being developed by the Group include Sennett Residence and Mont Botanik Residence.
• The property segment is also engaged in investment properties in Singapore, Australia and China. In FY19, the property development business and investment property business contributed 21% and 13% of Tuan Sing’s top line respectively. A noteworthy development was the receipt of a Temporary Occupation Permit (“TOP”) for the redeveloped investment property, 18 Robinson in 2019.
• Tuan Sing's hotel investments segment comprises two hotels in Australia, namely the Grand Hyatt Melbourne and Hyatt Regency Perth. Both hotels completed renovations in 2011 for a total cost of A$70.0m and saw occupancies of 91.0% and 75.7% respectively in FY19. The hotel investment segment contributed 33% of Tuan Sing’s revenue in FY19.
• Tuan Sing's industrial services segment consists of two businesses, namely SP Corporation (SGX:AWE) and Hypak Sdn Bhd. SP Corporation is involved in the trading of industrial commodities such as aluminium, coal and natural rubber. Hypak mainly deals with the manufacturing and marketing of polypropylene woven bags. Notably, while this segment constitutes a large proportion of Tuan Sing’s revenue, the businesses are low margin in nature. Net margin for the industrial services segment was only 1.2% for FY19.
• Tuan Sing also saw significant contributions from its other investments in Gul Technologies (GulTech) and Pan-West.
• The Group’s FY19 net profit from these two businesses was S$21.7m. GulTech manufactures PCBs that serve sectors such as automotive, computer peripherals and healthcare. GulTech has three manufacturing plants in China, one each in Jiangsu, Suzhou and Wuxi. Pan-West is a distributor of golf-related lifestyle products that distributes golfing brands such as Cleveland Golf and Volvik exclusively in Malaysia and Singapore.
• Tuan Sing has geographically diversified its business with Singapore revenue dropping to 52% of revenue in FY19 from 75% in FY14. Conversely, revenue from Australia had risen to form 38% of FY19 revenue, up from 4% in FY14. This change could largely be attributed to a shift in the business model towards recurring income. Specifically, Tuan Sing acquired 50% of the remaining interest in Grand Hotel Group (“GHG”) in December 2014. As a result, revenue from Australia rose due to GHG’s focus in Australia. Recurring revenue as a percentage of total revenue also rose from 8% in FY14 to 46% in FY19.

Tuan Sing Is Positioning Well for Recovery

Tuan Sing Holdings - Valuation

Summary of analysis to be updated. Meanwhile, click the view full report button below for complete analysis on Tuan Sing Holdings Limited (SGX:T24).

Source: DBS Research - 16 Jun 2020