Kim Eng on 20 Apr 2012
Background: Hiap Hoe Limited has more than three decades of experience in construction and building, and is now an integrated property developer focused on mid-tier and luxury residential properties. Its construction arm, WestBuild Construction, has an orderbook of more than SGD200m as of the end of last year.
Share price spiked on family infighting. The feud between founder Teo Guan Seng and his family has come to a standstill. Meanwhile, the shares have shot up as much as 66%, the highest since late-2007, as speculators awaited the founder’s move to divest its assets to shareholders.
Blow from ABSD. Residential sales for Hiap Hoe have slowed down significantly after the rollout of the Additional Buyer’s Stamp Duty (ABSD) last December. The group only sold four units YTD and has delayed the launch of Treasure on Balmoral. Assuming an ASP of SGD2,500 psf for the project in which it has a 60% stake, it can potentially a pre-tax profit of $13.2m. The 40-unit Three Balmoral, situated next to Treasure on Balmoral, sold six of the 20 units launched last October for SGD2,500 psf on average.
Hotel-cum-commercial development to be ready in 2014. With JV partner Superbowl, Hiap Hoe bought a mixed commercial-and-hotel site at Zhongshan Park along Balestier Road. The 421,000-sq-ft GFA site was bought for SGD172 psf ppr in mid-2008. When completed in 2014, the two hotels will have 390 rooms and 405 rooms, respectively. They will be managed by Wyndam Management and operate under the Ramada and Days Inn brands. We estimate its 50% stake is worth $0.24/sh. (avg. $500,000 per key)
44% discount to RNAV. The group is trading at a steep 44% discount to the RNAV and below its book of $0.53. If the founder decides to divest its assets, then the upside will be attractive.
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