Wee Hur Holdings

UOBKayhian on 16 Apr 2013

Valuation

·          Wee Hur Holdings (Wee Hur) is trading at 3.4x 2012 PE and 1.8x 2012 P/B.

Investment Highlights

·          Accredited constructor and developer with a strong orderbook. Wee Hur is a BCA Grade A1 builder with a notable portfolio of projects that include JCube, DBS Asia Hub and Courts Megastore @ Tampines. As at 31 Dec 12, the company had a strong orderbook of S$527.8m that provides high earnings visibility till 2015.

·          Bumper profit expected in 2014. As the completed contract accounting method is adopted for industrial development properties, Wee Hur saw a 750% surge in net profit for 2012 with the TOP and recognition of revenue for Harvest@Woodlands. Accordingly, investors can expect another surge in profit in 2014 with the TOP of Premier@Kaki Bukit (more than 95% sold), where Wee Hur owns a 60% interest in the 74,943 sqm GFA industrial development.

·          Consistent dividend payout. Wee Hur has been maintaining a dividend payout of at least 2 S cents since 2008. In its bumper profit year 2012, Wee Hur rewarded shareholders with a total dividend of 4 S cents. We like Wee Hur for its consistent dividend payout history and its willingness to reward shareholders in windfall years. Assuming Wee Hur maintains its 2 S cents dividend payout for 2013, it translates to a current dividend yield of 4.3%.

·          The next big project– Thomson View, third time’s the charm? In 2012, the JV between Wee Hur (51%) and Lucrum Capital (49%) successfully acquired Thomson View Condominium, a 99-year leasehold residential site sitting on a land area of 540,314.4sf. After including the differential and lease upgrading premium payable, estimated cost of acquisition is S$712 psf ppr. Another 99-year leasehold residential site at Bright Hill drive was sold at a cost of S$719.9 psf ppr to a JV between UOL and Singapore Land in 2012. With Thomson Grand (launched in 2011 and fully sold out with an ASP of S$1,330 psf) being the only new launch in the vicinity for the past few years, we expect the launch of Thomson View to be highly anticipated by investors. However, the Thomson View project recently hit the brakes when 13 of the condo’s owners filed for a stop order against the sale. With the stop order, uncertainty over the project looms as risks of a sale termination or a long dreaded legal battle emerged. The stop order is also likely to delay project launch and future earnings. Any new property cooling measures announced during this period may also deter buying sentiment. Thomson View had been unsuccessful in its two previous enbloc attempts in 2007 and 2011.

·          Our view. While uncertainty looms over the future of Thomson View, there is definitely a heightened market interest in Wee Hur. The stock has seen a jump in volume since the start of the year. With an established track record and a good practice of rewarding shareholders with consistent dividend payout, any positive news about Thomson View will be a catalyst for the stock price.