BUY; 22% upside to our TP. The recent spate of privatizations in the property space (Guthrie GTS, Pan Pacific Hotels Group) highlights the latent value in real estate commercial landlords. In this report, we highlight Lee Kim Tah (LKT), a niche developer cum landlord, trading at a 34% discount to its RNAV. We like the stock for its undervalued real estate assets, with catalyst from a privatization move by the founding Lee family. Our re-appraised net asset value for the stock stands at $1.28/share, taking into account the revaluation surplus for Jurong Point (JP) and 50% of the surplus from SIPOT Info Tech Park Chennai.

Background. From its roots as a construction company, Lee Kim Tah has evolved into a property developer cum landlord. Today, it owns a myriad of real estate assets, including a 50% stake in suburban retail mall JP, hotel and investment properties in Sydney, a 48% stake in Marco Polo Xiamen Hotel and a 74.85% stake in an integrated township in Chennai. LKT has also been successful in exporting its construction business overseas, and has a successful joint venture in India with Woh Hup, where the JV has secured several major construction projects in Bangalore and Chennai and is embarking on its maiden residential development in Bangalore.

Jurong Point the crown jewel. Within its portfolio, the jewel in the crown is its 50% stake in Jurong Point (JP). JP is the  largest suburban mall in Singapore with a lettable area of some 690,000 sf. Given its strategic location as the only sizable mall in Jurong West, the mall enjoys robust retail traffic and virtually full occupancy. Operating metrics - NPI margin of 71% and revenue intensity of S$177 revenue/psf - stacks up well against some of CMT's best suburban malls. Cognizant of the  competition from upcoming malls in Jurong East, management has been revitalizing its tenant mix and creating innovative food and beverage concepts to complement its entertainment offerings. We see scope for upward rental reversion as the mall is currently under-rented at $16-17 psf pm, below the $18-20 psf pm for prime suburban malls. LKT's stake is carried at S$761m or S$2,194 psf in its books, while we value its stake at S$837m, or S$2400 psf, based on a cap rate of 5.82%. This
implies a revaluation surplus of $88m, or S$0.15/share.

Source: OSK