Tuan Sing Holdings

OCBC on 30 Sept 2014

Last Friday evening, it was reported that Mr Koh Wee Meng, Chairman and CEO of the Fragrance Group, brought his shareholdings of Tuan Sing from 4.46% to 5.02% via share purchases in the open market, making him a substantial shareholder. Mr Koh had purchased, from the open market on 25 Sep 2014, 6.5m shares at an average price of S$0.432 per share. Tuan Sing is a real estate developer with assets in Singapore, China and Australia, and the group also recently acquired the remaining 50% interests, that it did not already own, in two five-star hotels in Australia, namely Grand Hyatt Melbourne and Hyatt Regency Perth, for A$126m. The group is currently controlled by the Liem family, who owns at least 53.5% collectively, and we highlight that it remains speculative as to what Mr Koh’s intentions are. After this news, Tuan Sing shares soared to a 5-year high yesterday, closing at S$0.455 per share with 26m shares traded (~5.5% of float). This closing price represents a still-significant 30.1% discount to Tuan Sing’s book value of S$0.651 per share, which is broadly in line with comparable peers currently trading at an average discount of 27.7%. We currently have do not have a rating on Tuan Sing.

A significant shareholder emerges
Last Friday evening, it was reported that Mr Koh Wee Meng, Chairman and CEO of the Fragrance Group, brought his shareholdings of Tuan Sing from 4.46% to 5.02% via share purchases in the open market, making him a substantial shareholder. Mr Koh had purchased, from the open market on 25 Sep 2014, 6.5m shares at an average price of S$0.432 per share. After this news, Tuan Sing shares soared to a 5-year high yesterday, closing at S$0.455 per share with 26m shares traded (~5.5% of float). While this closing price represents a still-significant 30.1% discount to Tuan Sing’s book value of S$0.651 per share, we also note this is broadly in line with comparable peers currently trading at an average discount of 27.7%

Recently acquired remaining interests in two 5-star AZ hotels
Tuan Sing is a real estate developer with assets in Singapore, Australia and China. Its residential developments in Singapore include projects such as Sennett Residences (91% sold as at end 2Q14), Cluny Park Residences (33% sold) and Seletar Park Residence (95% sold). Commercial projects include Robinson Tower (currently under redevelopment), Robinson Point and also Century Warehouse. In Sep 2014, Tuan Sing also recently acquired the remaining 50% interests, that it did not already own, in two five-star hotels in Australia, namely Grand Hyatt Melbourne and Hyatt Regency Perth, for A$126m.

Australian assets could be particularly attractive
Tuan Sing is currently controlled by the Liem family, who owns at least 53.5% collectively, and we highlight that it remains speculative as to what Mr Koh’s intentions are. That said, we note that Mr Koh, a seasoned real estate developer, has publicly indicated his plans for expansion in Australia following the slowdown in the Singapore residential market, and his company Fragrance Group has also recently proposed plans to spin-off its property business in Australia on the Catalist board. As such, in addition to Tuan Sing’s attractive valuation, its two prime hotels in Melbourne and Perth could be of special interest to Mr Koh. We currently do not have a rating on Tuan Sing.

Tuan Sing Holdings

NRA Capital Research, May 29

TUAN Sing (TS) is primarily a property developer, deriving 85 per cent of its group earnings in FY12 from the property segment.

Despite the latest property cooling measures, sales of Sennett Residence, which is near the Potong Pasir MRT station, sold well with a take-up rate of 79 per cent since the project's launch in March 2013.

The remaining projects launched with unsold units are Seletar Park Residence (95 per cent sold) and Phase III of Lakeside Ville in Shanghai (86 per cent sold).

Based on confirmed sales, unrecognised profits (as at last Dec 31) from sold units in these projects are expected to enhance RNAV per share by about 12 Singapore cents.

Tuan Sing plans to launch Cluny Park Residence, a 52-unit freehold premier residential project in July.

Management guided a launch price of $2,600 per square foot (psf), which is a tad aggressive in our opinion.

However, this small-scale project in a choice location by a quality developer could appeal to a certain pool of buyers.

A full take-up rate of this project alone will enhance RNAV per share by 2.5 cents.

There are currently no plans to launch two projects, located in Fujian and Shandong provinces, in China.

The proposed redevelopment of Robinson Towers, its annex and the International Factors Building into a single commercial development comprising an office tower and a retail podium will commence in Q4 FY13, once existing tenants vacate the premise, at the latest, by the end of this month.

Upon completion expected in 2016, the redevelopment will enhance the lettable floor area of the redeveloped buildings and investment property portfolio by 65 per cent to 261,000 square feet and 37 per cent to 320,000 square feet respectively.

Tuan Sing will enjoy a sharp uplift in recurring rental income from about $11 million in FY12 to an estimated $28 million in FY17, assuming full occupancy in the new commercial building and a conservative average rental of $8.20 psf and $12.50 psf for office and retail spaces respectively.

Going forward, Tuan Sing plans to participate in land acquisition in Singapore through the government land sale programme.

It is also looking to pursue opportunities to acquire commercial buildings as part of the group's strategy to build up recurring income.

Its balance sheet strength and low gearing of 0.47x as at March 31 bode well for the group, providing it with the financial resources to pursue investment plans.

Adopting a conservative stance and valuing only the property development and investment division, we value TS at RNAV per share of 78 cents per share and a target price of 47 cents, taking a 40 per cent discount to valuation to account for TS' small market capitalisation, illiquidity and, particularly, policy risk.

Taking our conservative stance further to account only for completed sales of existing development projects Seletar Park Residence and Sennett Residence, our fair value and target price of 74 cents and 44 cents still offer upside of about 24 per cent.

This also does not account for the other businesses, including hotel ownership in Australia, growth prospects of the printed circuit board manufacturing operation at Gul Technologies and commodity trading at SP Corporation.

Downside risk to share price is also supported by low P/B of 0.57x, compared to P/B of 1.0x of small-cap property peers. Tuan Sing is relatively undervalued.

OVERWEIGHT

Tuan Sing Holdings Limited

Uobkayhian on 2 Jan 2013

Valuation

·          Tuan Sing (TSH) is trading at 7.0x FY11 PE and 0.6x P/B. Share price catalysts include an improvement in quarterly earnings due to the recognition of property sales and revaluation gains in its investments.    

Investment highlights

·          TSH is now primarily a property developer with this segment attributing more than half of 9M12’s profit before tax. The group has completed various property development projects, such Leedon Parkand Adam Park Condominium in Singapore and Lakeside Ville in China. It has also undertaken several projects, namely Seletar Park Residence, Mont Timah and Sennett Residence and plans to launch Cluny Park Residence in early 2013.

·          Most recently, TSH commenced the redevelopment of Robinson Towers into grade A office tower with a retail podium with a total gross floor area of 23,900sqm. TSH should be keeping the project as an investment property and has engaged Jones Lang LaSalle as the leasing agent.

·          On top of property development, TSH also co-owns two hotel properties in Australia, represented by its 50%-owned jointly-controlled company Grand Hotel Group (GHG). The two hotels, Grand Hyatt Melbourne and Hyatt Regency Perth, are managed by Hyatt International and generated A$124m in revenue and A$40.1m in net property income for 2011.

·          Lastly, TSH has invested in several entities such as 80.2%-owned SP Corporation Limited, 97.9%-owned Hypak Sdn Berhad, 43.3% interest in SGX-listed Gul Technologies Singapore Ltd and a 49% stake in Pan-West. 

·          SP Corp is engaged in commodities trading, and the distribution of tyres and auto-related products. Hypak is in the business of manufacturing and marketing polypropylene packaging bags inMalaysia. Gul Technologies is a printed circuit board manufacturer while Pan-West is a retailer of golf-related products.

9M12 Financials Highlights

·          Revenue jumped 55.5% to S$259.9m, mainly driven by higher development property sales from Mont Timah and Seletar Park Residence inSingapore and Lakeside Ville in China. This segment also contributed positively to profit after tax of S$19.8m as compared with S$7.3m in 9M11. 

·          Industrial services, represented by SP Corp and Hypak, recorded slightly lower revenue of S$134.1m and profit after tax of S$1.2m as compared with S$139.8m and S$1.2m in the same corresponding period last year. Overall, the group’s profit after tax rose 124% to S$35.6m.