Strong Home Sales in 2021 Lifted 1H22 Earnings by 117% to S$12m

• All 3 residential projects of SLB Development (SGX:1J0) (20%-owned Riverfront Residences, 20%-owned Affinity @ Serangoon and 42%-owned REZI 24) are fully sold before the cooling measures were imposed on 16 Dec 2021.
• SLB Development's 51%-owned industrial project INSPACE contributed positive gain of ~S$2.3m. It also booked S$1.8m rental income from freehold industrial property Thye Hong Centre, which was acquired for S$112.5m, or S$550/sf ppr. Annual rental is expected rise to about S$5m (cap rate 4.4%) after asset enhancement initiative (AEI) that drove a 30% rental uplift.
• SLB Development's other projects on hand include
  • a 10%-stake in the en-bloc acquisition of Peace Centre for S$650m or about S$1,385/sf ppr, to be re-developed into a 60:40 commercial/residential development; and
  • a 9-10% stake in Gaobeidian, a mixed-use development project spanning 5.3m sqm land in Hebei Province.

Building Recurring Income

• SLB Development is building recurring 17 shophouses in Jalan Sultan for S$74.8m to be converted into co-living space. Weave Living will take a significant majority stake.

Strengthening Its Balance Sheet

• SLB Development's net debt as at end Nov 21 was S$107m, or net gearing of 57.8%.
• We expect substantial cash inflow of S$190m in 2022/2023 from the residential projects and INSPACE, as these reached TOP. About S$35m might be deployed as equity at the Peace Centre project.

Valuation

• SLB Development trades at 40% discount to book. The discount should narrow when fee income and carry interest become a significant and stable income stream.

Source: SAC Capital Research - 15 Mar 2022