Singapore Land

AmFraser Securities on 20 Feb 2012

SINGAPORE Land Ltd reported a 51 per cent plunge in net profit to $331 million for FY2011. Results were below expectaions, meeting 92 per cent of consensus estimates and 85 per cent of our FY2011 forecast.

It was mainly attributable to significantly lower revaluation gain of $126 million in FY2011.

Topline growth of 17 per cent was aided by higher sales recognition of The Trizon in Singapore and increased revenue from Pan Pacific (Pan Pac) hotel. However, negative rental reversions had set in dragging rental income 4 per cent lower.

SingLand sold three units of The Trizon at an average selling price (ASP) of $1,641 per square foot (psf) in Q4 FY2011. Take-up rate stands at 83 per cent. Comparing q-o-q, take-up rate inched only 1 per cent but ASP had reversed with a 3 per cent price gain.

Over the past two months, SingLand had also sold 23 per cent of a residential project - Archipelago along Bedok Reservoir Road at an ASP of $1,117 psf. It is a 50:50 joint venture with UOL Ltd. We are maintaining our ASP assumption of $1,100 psf.

Earnings from hotel operations were 10 per cent higher owing to both higher room and occupancy rates and F&B takings.

Although Mandarin Oriental and Marina Mandarin posted similar gains, associates' results were impacted by lower residential contribution due to completion of One Amber.

According to statistics released by Urban Redevelopment Authority (URA), median office rental rates rose by 8 per cent to $9.51 psf per month (pm) in FY2011. It marked the seventh consecutive quarter of increase.

We reiterate our stance on SingLand's relatively older buildings being sidestepped in favour of newer buildings. SingLand has guided that its renewal lease rates are lower than expired ones and the situation is likely to persist in our opinion. Other older building in Raffles Place such as Equity Plaza is also finding it tough to fill up spaces.

Office solutions provider, Corporate Locations, expects rental rates to soften after peaking in Q3 FY2011. 9.8 million sq ft of new office is scheduled to come on stream in the next four years.

We have revised our RNAV estimate downwards by 4 per cent to $9.59 per share factoring in a 10 per cent fall in rental rates for its office properties. Pegging our fair value at parity to our RNAV estimate, we maintain our 'buy' rating. Its parent, United Industrial Corp Ltd, had continuously accumulated SingLand's shares, albeit at a slower pace in Q4 FY2011, to its current 78.44 per cent holdings.
BUY