Singapore Land Limited

Kim Eng on 6 Aug 2012

Results largely within expectations. Due to the temporary closure of Pan Pacific Singapore hotel for renovation works, SingLand's 2Q12 core PATMI excluding revaluation gains came in at SGD42.4m - down 23% YoY, 24% QoQ. 1H12 core PATMI of SGD97.9m is largely in line with expectations. With the office portfolio remaining fairly resilient, and the acquisition of two more residential sites this year, we upgrade our recommendation to HOLD.

Office income stable. Despite the weak office leasing market, SIngLand's gross rental income remained stable, dipping marginally by just 1% on a QoQ basis to SGD59.1m. The temporary closure of Pan Pacific Hotel has resulted in a SGD7.9m operating loss this quarter, which is likely to continue into 3Q12 as the hotel is expected to reopen in stages only from August.

Trizon may provide some uplift in 2H12. SingLand sold a further 12 units at The Trizon in 2Q12. As the project had already obtained its TOP in May, profits from the sales of the remaining 35 units can now be recognised immediately. The project's ASP has climbed steadily from ~SGD1,300 psf when it was launched in 2009 to ~ SGD1,800 psf now.

Forays to replenish landbank. This year, SingLand has acquired two residential sites from the Government Land Sales Programme. The first is a site at Jervois Road, purchased at SGD118.9m, with an estimated breakeven of SGD1,325 psf. The other is a site off Farrer Road, acquired at SGD113.2m, with an estimated breakeven of SGD1,611 psf. RNAV accretion is however marginal at 5 cts/sh and 3 cts/sh respectively.

Upgrade to HOLD. We raise our target price to SGD5.36, pegged to a 50% discount to RNAV. However, we see very few reasons to turn too bullish in the near-term. HOLD.