Company background:
Hiap Hoe has more than three decades of experience in the construction industry in Singapore. Today, its primary focus is the development of mid- to high-end residential properties and its construction subsidiary mainly takes on the group’s own development projects.
Key ratios…
Price-to-earnings: 5.9x
Price-to-NTA: 0.96x
Dividend per share / yield: 0.5 cts / 1.1%
Net debt per share: $0.50
Source: Bloomberg, based on historical data
Everything else…
Share price S$0.435
Issued shares (m) 471.5
Market cap (S$m) 205.1
Free float (%) 30%
Recent fundraising activities Jul 2008: 1-for-4 rights issue at $0.28; $21m raised
Financial YE December 31
Major shareholders Founding Teo family – 70%
YTD change -1.14%
52-wk price range S$0.385-0.50
Our View:
Projects see good sales. The take-up rate for Hiap Hoe’s projects has been very healthy at 75% overall. The two most profitable projects are the 100%-owned Waterscape at Cavenagh and Skyline 360 at St Thomas Walk. For Waterscape, we estimate the company’s all-in cost to be about $220m, which compares favourably with the project’s estimated GDV
which is nearly double at about $400m. As for Skyline 360, the cost for Hiap Hoe is $140m while the GDV of the project is estimated to be close to $250m.
A piece of Balmoral. The group is awaiting an opportune time to launch its 48-unit Balmoral development called Treasure on Balmoral, a 60:40 joint venture with SuperBowl. Assuming a price of $2,500 psf, we expect the project to achieve 10% pre-tax margin.
Foray into hospitality sector. Hiap Hoe made its first hotel investment in 2008 after winning a tender for a hotel site at Balestier Road. The plot of land has a total GFA of about 421,000 sq ft and is currently being developed into two office buildings and two hotels with about 800 rooms. The total development cost is expected to be $300m and the project is scheduled for completion in 2014.
Steep discount. The stock currently trades at steep 50% discount to the RNAV and below its book of $0.455. The future development profits consist of about $110m from sold units and $95m from future sales priced at current market values.
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