Event
Singapore Land reported 2Q11 net profit of $273.3m on the back of a $218.2m revaluation gain. Excluding that, net profit would have been $55.2m. Core profit for 1H11 fell by 6% YoY to $103.9m. However, this was marginally higher than consensus estimates, possibly due to higher-than-expected profits recognised from The Trizon. We maintain our HOLD recommendation as we see few positive catalysts.
Our View
SingLand’s rental income from its investment properties continued to slide on the back of negative rental reversion despite improved occupancy rates, declining by 6% YoY and 3% QoQ. Management expects the growth of office asking rents to moderate in the wake of increasing supply of new and secondary office space. The darkening economic outlook could curtail that growth even further.
Gross revenue from hotel operations (ie, from Pan Pacific Hotel) rose slightly by 4% YoY to $28.7m. On a sequential basis, the growth is more moderate at 1% due to higher room and occupancy rates. We expect SingLand’s hotels to continue their strong performances, especially with events such as the Singapore Grand Prix coming up in September.
Revenue recognition from The Trizon came in stronger than expected due to more units being sold and a higher percentage of completion. As of end-June, almost 80% of the 289 units at the freehold project have been sold. Based on the latest marketing materials, current asking prices start from $1,480 psf and we have adjusted our overall ASP estimate for the project from $1,300 psf to $1,350 psf, raising our RNAV by 3 cents per share.
Action & Recommendation
Due to the growing dark economic clouds on the horizon that may impact office demand, we reduce our target price to $7.30 (previously $8.30), pegged at a 30% discount to RNAV. Maintain HOLD.
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