We met the management of UE E&C last week for an update. Despite the labour crunch in the construction industry and the cooling measures introduced by the government, management remains upbeat. The group has implemented productivity enhancement measures and adopted new technologies to facilitate work processes to help mitigate the tighter manpower constraints and rising costs. Meanwhile, the group has an estimated order-book of S$600-800m, anchored by four key residential developments: Austville EC, Watercolours EC, Prince Charles Crescent and the new Punggol EC. We now roll forward our estimate to FY13F and incorporate projections for the new Punggol EC project. This increases our SOTP fair value to S$0.82 (previously S$0.68). Upgrade to BUY
Headwinds in the construction industry
We met with the management of UE E&C last week for an update. Despite the labour crunch in the construction industry and the cooling measures introduced by the government, management remains upbeat. The group has implemented productivity enhancement measures and adopted new technologies to facilitate work processes in order to help mitigate the tighter manpower constraints and rising costs. Nonetheless, softening prices of new residential units could still adversely impact its unsold development projects.
Healthy pipeline of projects
We estimate its order-book to be worth around S$600-800m, anchored by four key residential developments: Austville EC (expected completion in 2013-14), Watercolours EC (2015), Prince Charles Crescent (2015-16) and Punggol EC (2015-16). Austville EC is fully sold, while Watercolours EC is about 80% sold (as of end Feb-13). The Prince Charles Crescent project (a co-development with Wing Tai Holdings and Metro Holdings) has not yet been launched, but is expected to feature a “new, differentiated residential development, in response to the highly discerning mid-high segment of the market”. We estimate the break-even price to be S$1,450 psf. As a comparison, the recently launched Echelon condominium at nearby Alexandra View is already 85% sold with a median price of ~S$1,800 psf (for Feb-13). Finally, we expect the new Punggol EC to be launched in the middle of this year at an average selling price of S$740 psf, versus an estimated break-even price of S$650 psf.
Upgrade to BUY
We now roll forward our estimate to FY13F and incorporate projections for the new Punggol EC project. This increases our SOTP fair value to S$0.82 (previously S$0.68). Upgrade to BUY. The strong net cash position of S$91m also provides the group with the flexibility of pursuing inorganic growth opportunities if they arise.
We met with the management of UE E&C last week for an update. Despite the labour crunch in the construction industry and the cooling measures introduced by the government, management remains upbeat. The group has implemented productivity enhancement measures and adopted new technologies to facilitate work processes in order to help mitigate the tighter manpower constraints and rising costs. Nonetheless, softening prices of new residential units could still adversely impact its unsold development projects.
Healthy pipeline of projects
We estimate its order-book to be worth around S$600-800m, anchored by four key residential developments: Austville EC (expected completion in 2013-14), Watercolours EC (2015), Prince Charles Crescent (2015-16) and Punggol EC (2015-16). Austville EC is fully sold, while Watercolours EC is about 80% sold (as of end Feb-13). The Prince Charles Crescent project (a co-development with Wing Tai Holdings and Metro Holdings) has not yet been launched, but is expected to feature a “new, differentiated residential development, in response to the highly discerning mid-high segment of the market”. We estimate the break-even price to be S$1,450 psf. As a comparison, the recently launched Echelon condominium at nearby Alexandra View is already 85% sold with a median price of ~S$1,800 psf (for Feb-13). Finally, we expect the new Punggol EC to be launched in the middle of this year at an average selling price of S$740 psf, versus an estimated break-even price of S$650 psf.
Upgrade to BUY
We now roll forward our estimate to FY13F and incorporate projections for the new Punggol EC project. This increases our SOTP fair value to S$0.82 (previously S$0.68). Upgrade to BUY. The strong net cash position of S$91m also provides the group with the flexibility of pursuing inorganic growth opportunities if they arise.
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