The group is undergoing a re-tenanting exercise at Scotts Square retail mall with several new F&B and fashion-house names (including London Fat Duck, Time & Flow, Alexander McQueen, Delvaux, and the Pedder Group) as management attempts to rejuvenate the mall going into the new leasing cycle. We understand that extensive advertising and promotion programs are in store for FY15 to improve foot traffic for the retail mall, which has faced headwinds since its opening given its unique positioning as a smaller high-end boutique mall beside larger neighbors with more F&B and retail options. While we expect to see continued sequential pressure on the mall’s performance in 1H15, we note that the group has already conservatively written down the valuation of the mall by S$52m (17%) and is in a solid financial position to ride out current headwinds. Maintain BUY with an unchanged S$2.27 fair value estimate.
Rejuvenating Scotts Square mall with new tenants
The group is undergoing a re-tenanting exercise at Scotts Square retail mall with several new F&B and fashion-house names (including London Fat Duck, Time & Flow, Alexander McQueen, Delvaux, and the Pedder Group) as management attempts to rejuvenate the mall going into the new leasing cycle. We understand that extensive advertising and promotion programs are in store for FY15 to improve foot traffic for Wheelock’s retail mall, which has faced headwinds since its opening given its unique positioning as a smaller high-end boutique mall beside larger neighbors with more F&B and retail options. To recap, the occupancy rate and average monthly rents have dipped QoQ from 93% and ~S$21 psf in 3Q14 to 88% and ~S$16 psf in 4Q14 respectively; and we expect to see continued sequential pressure on Scotts Square mall’s performance in 1H15 as the management engineers a turnaround. Note that the group has already conservatively written down the valuation of the mall by S$52m (17%) to reflect the difficult operating conditions in its initial leasing cycles.
Maintain BUY with unchanged S$2.27 fair value estimate
That said, we believe the group is in a solid financial position to ride out current headwinds in the domestic residential segment and at Scotts Square mall. As at end FY14, the group’s balance sheet remains in a solid position with S$408.5m in cash and a low net gearing of 8.0%. In addition, we note that the group’s key associate Hotel Properties Ltd continues to actively diversify into prime projects overseas, recently announcing that it would acquire a 30% stake in two properties, Ludgate House and Sampson House, located in Bankside, London. Both assets are acquired with an existing consented scheme comprising ~552k sq ft NIA of private residential accommodation, 285k sq ft of offices and 36k sq ft of retail and leisure space. Maintain BUY with an unchanged S$2.27 fair value estimate.
The group is undergoing a re-tenanting exercise at Scotts Square retail mall with several new F&B and fashion-house names (including London Fat Duck, Time & Flow, Alexander McQueen, Delvaux, and the Pedder Group) as management attempts to rejuvenate the mall going into the new leasing cycle. We understand that extensive advertising and promotion programs are in store for FY15 to improve foot traffic for Wheelock’s retail mall, which has faced headwinds since its opening given its unique positioning as a smaller high-end boutique mall beside larger neighbors with more F&B and retail options. To recap, the occupancy rate and average monthly rents have dipped QoQ from 93% and ~S$21 psf in 3Q14 to 88% and ~S$16 psf in 4Q14 respectively; and we expect to see continued sequential pressure on Scotts Square mall’s performance in 1H15 as the management engineers a turnaround. Note that the group has already conservatively written down the valuation of the mall by S$52m (17%) to reflect the difficult operating conditions in its initial leasing cycles.
Maintain BUY with unchanged S$2.27 fair value estimate
That said, we believe the group is in a solid financial position to ride out current headwinds in the domestic residential segment and at Scotts Square mall. As at end FY14, the group’s balance sheet remains in a solid position with S$408.5m in cash and a low net gearing of 8.0%. In addition, we note that the group’s key associate Hotel Properties Ltd continues to actively diversify into prime projects overseas, recently announcing that it would acquire a 30% stake in two properties, Ludgate House and Sampson House, located in Bankside, London. Both assets are acquired with an existing consented scheme comprising ~552k sq ft NIA of private residential accommodation, 285k sq ft of offices and 36k sq ft of retail and leisure space. Maintain BUY with an unchanged S$2.27 fair value estimate.
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