KSH would acquire a 30% stake in 160 Changi Rd, located at the corner of Changi Rd and Lorong 105 Changi, for S$20.4m. Assuming a 50:50 retail and office breakdown and selling prices of S$2.8k and S$1.8k for retail and office, respectively, we estimate a 1.5 S-cents accretion to KSH’s RNAV. We like that KSH has re-deployed capital expediently into new projects after raising S$13.9m in mid-Mar 2013, and believe this points to a well thought-out plan for capital management and growth. Maintain BUY with an increased fair value estimate of S$0.62 versus S$0.61 previously. Our SOTP methodology conservatively values KSH’s construction segment at 4x FY13E earnings and its property segment at a 40% RNAV discount. This being so, its fair value estimate could re-rate signficantly if construction order book replenishment continues unabated and/or upcoming launches perform well.
Acquires stake in 160 Changi Road
KSH would acquire a 30% stake in 160 Changi Rd located at the corner of Changi Rd and Lorong 105 Changi. The consortium comprises KSH (30%), Lian Beng (40%) and Tee Intl (30%) and would acquire 160 Changi for S$68m. The site is zoned “Commercial” and has a land area of 17,974 sq ft with plot ratio 3.0. The group intends to redevelop the site into a mixed retail and office project.
Project expected to accrete 1.5 S-cent to RNAV
We believe the redevelopment would consist of 50:50 retail and office components, and estimate the overall breakeven price to be S$1.75k psf. Assuming a selling price of S$2.8k and S$1.8k for retail and office, respectively, this project has an estimated net profit margin of 20%, on an overall basis, and would accrete 1.5 S-cents to KSH’s RNAV.
Fast re-deployment of capital for growth
We like that KSH has re-deployed capital expediently into new projects after raising S$13.9m from a placement of new and treasury shares in mid-Mar 2013. Over the last two weeks, the group has increased its stake in its Beijing condominium project (Liang Jing Ming Ju, Phase 4) from 26.2% to 45.0% for S$1.9m, and acquired a 30% stake in 160 Changi Rd for S$20.4m. In our view, this points to a well thought-out plan for capital management and growth, particularly as KSH bought back a significant number of shares into its treasury at S$0.22 - S$0.32 in late 2012 and placed them out at S$0.408 to private investors in Mar 2013.
Fair value estimate raised to S$0.62
Maintain BUY with an increased fair value estimate of S$0.62 versus S$0.61 previously as we incorporate this acquisition into our model. Our SOTP methodology conservatively values KSH’s construction segment at four times FY13E earnings and its property segment at a 40% RNAV discount. This being so, its fair value estimate could re-rate signficantly if construction order book replenishment continues unabated and/or upcoming launches perform well.
KSH would acquire a 30% stake in 160 Changi Rd located at the corner of Changi Rd and Lorong 105 Changi. The consortium comprises KSH (30%), Lian Beng (40%) and Tee Intl (30%) and would acquire 160 Changi for S$68m. The site is zoned “Commercial” and has a land area of 17,974 sq ft with plot ratio 3.0. The group intends to redevelop the site into a mixed retail and office project.
Project expected to accrete 1.5 S-cent to RNAV
We believe the redevelopment would consist of 50:50 retail and office components, and estimate the overall breakeven price to be S$1.75k psf. Assuming a selling price of S$2.8k and S$1.8k for retail and office, respectively, this project has an estimated net profit margin of 20%, on an overall basis, and would accrete 1.5 S-cents to KSH’s RNAV.
Fast re-deployment of capital for growth
We like that KSH has re-deployed capital expediently into new projects after raising S$13.9m from a placement of new and treasury shares in mid-Mar 2013. Over the last two weeks, the group has increased its stake in its Beijing condominium project (Liang Jing Ming Ju, Phase 4) from 26.2% to 45.0% for S$1.9m, and acquired a 30% stake in 160 Changi Rd for S$20.4m. In our view, this points to a well thought-out plan for capital management and growth, particularly as KSH bought back a significant number of shares into its treasury at S$0.22 - S$0.32 in late 2012 and placed them out at S$0.408 to private investors in Mar 2013.
Fair value estimate raised to S$0.62
Maintain BUY with an increased fair value estimate of S$0.62 versus S$0.61 previously as we incorporate this acquisition into our model. Our SOTP methodology conservatively values KSH’s construction segment at four times FY13E earnings and its property segment at a 40% RNAV discount. This being so, its fair value estimate could re-rate signficantly if construction order book replenishment continues unabated and/or upcoming launches perform well.
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