SC Global Developments

Kim Eng on 27 Feb 2012

Quarterly loss, $25m write-down on Ardmore Park. SC Global reported a net loss of $18.6m for 4Q11, primarily due to a $25m write-down on its Ardmore Park project, which is currently under construction. Excluding the write-down, net profit for 4Q11 was $4.6m, below our expectation as operating expenses were higher owing to higher sales and promotion expenses as well as higher service charges for its completed inventory. Full-year FY11 revenue was $769.1m and net profit was $132.2m. We maintain our Hold recommendation.

Sales remained slow. The luxury segment has seen very little sales since the introduction of the 10% Additional Buyer’s Stamp Duty (ABSD) for foreigner purchases in December last year. The only project that has bucked the trend is The Scotts Tower by Far East Organization, where up to 25 units were sold after the ABSD took effect, at a median price of $3,300 psf. In 4Q11, SC Global sold only a unit from its landbank in Singapore, although that unit at The Marq on Paterson Hill achieved a record price of $6,841 psf. There were no sales last month.

More finished units on hand. With the residential component of Martin No. 38 obtaining TOP in November last year, SC Global has almost fully recognised its outstanding orderbook of pre-sold units, with the exception of Seven Palms, which we estimate has less than $10m in after-tax profits from the 10 units sold. Seven Palms is expected to complete construction by year-end. Earnings going forward will be underpinned by any new sales from its completed projects, The Marq on Paterson Hill, Hilltops and Martin No. 38, with a total of 337 units. Pre-sales in Ardmore Park have not commenced.

Maintain Hold. We maintain our Hold call with an unchanged target price of $1.05, based on a 70% discount to its RNAV of $3.49. SC Global has proposed a final dividend of 2 cents per share, which translates to a yield of 1.8%. We will revisit our assumptions only when sales in the luxury segment start to pick up.