As Pan Pacific gets an overhaul.
According to CIMB, 3Q12 benefited from development profits in China. Rental income stabilised which, together with low interest rates, bodes well for asset values.
Here's more from CIMB:
A pick-up in capital deployment this year promises more development profits and returns, which could catalyse the stock.
3Q/9M12 core earnings met estimates at 28%/77% of our FY12 forecast and 26%/72% of consensus, on lumpy recognition of 3Q China development profits.
We adjust EPS by -14%/+9% for recognitions and raise our target price for the Bright Hill Drive acquisition, lower cap rates and lower RNAV discount of 40% (prev. 45%).
3Q12 earnings were up 25% qoq, largely propped up by recognition of the Chengdu residential project. Rental income was stable at -1% yoy.
But hotel revenues were down 75% yoy as Pan Pacific was closed for renovations. The hotel has since been reopened. Management appears more positive on the retail and hospitality segments and expects office rents to remain competitive.
Existing residential projects benefited from strong volumes sector-wide.
Additional units were at Trizon (91% sold). Archipelago was almost sold out (Jun 12: 76%) and profits will be recognised progressively. Capital deployment has been more active, promising more development profits.
The Bright Hill Drive government land site acquired in Aug in a JV with UOL is its third land plot purchase this year. While land bids were aggressive, we expect the resilient property market to digest SingLand’s smaller sites with ease. Projects should yield >10-20% margins, with the Jervois road site potentially launched at end-2012/early-2013.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)
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