2QFY16 (Mar) results were in line. Maintain BUY with a lower RNAV derived TP of SGD0.14 (from SGD0.16, 33% upside). Despite the negative publicity shrouding Pasir Ris One over narrow corridors and surface defects, sales for 90% of the total units has been recognized in 1HFY16. With persistent headwinds confronting the domestic front, we are eager to see more acquisitions in the US and other regions that may heighten its earnings resilience and diversification beyond the remaining two EC projects in Singapore.
■ 1HFY16 (Mar) results in line
1HFY16 PATMI registered strong performance mainly due to contribution from the Pasir Ris One DBSS project (total 447 units) which was awarded Temporary Occupation Permit (TOP) in May. Another 3% sales of the total units of the project was recognized in 2QFY16. All in, SingHaiyi has recognized sales for 90% of the total units of this development. 1HFY16 gross profit margin declined by 43.8 ppt to 13.6% because of Pasir Ris One project which had a lower profit margin.
■ Two more ECs to go
CityLife@Tampines EC (100% sold), which SingHaiyi has a 24.5% stake, is expected to TOP in 4QFY16 and the result is expected to be accounted for in FY16. We forecast an attributable PBT of SGD22.7m, which will be recognized in its entirety upon receiving TOP. On 18 July 2015, SingHaiyi also launched The Vales EC at Anchorvale Crescent, expected to TOP in 1H17. Average selling price is SGD784 psf (1QFY16: 787 psf) from the 128 transactions registered with URA as of Nov 2015, and we expect a revenue contribution of SGD351m in FY18.
■ More overseas exposure to lift earnings
We roll forward our RNAV valuations to FY17. With progressive recognition of Pasir Ris One this year, SingHaiyi thus has lesser exposure to Singapore. The Singapore property development segment makes up 27% from 38% previously, while SG, US and Malaysia will now constitute 65%, 31% and 4% of FY17 RNAV exposure respectively. With the slowdown in the domestic front, we are awaiting more accretive acquisitions from overseas to drive future earnings. Maintain BUY with a lower RNAV-derived TP of SGD0.14 (upside 33.3%). (Read Report)
Source : RHB Research