Far East Orchard

Far East Orchard (FEOR): 3Q12 net profit shot up to $126m, +680% qoq, +293% yoy, mainly driven by the disposal gain of its 35% Yeo Hiap Seng stake to its parent, Far East Organisation. The newly acq NMC/ NSC units and hospitality mgt business also made their maiden contribution of $0.4m and $1.5m respectively. Maybank KE estimates avg gross rental units for the medical units to be ~$10.50 psf/mth. The house notes contribution from FEOR’s property devt business will ease, as it had recognized the final profit from the Floridian project (TOP 5 mar ’12) in 3Q12. Meanwhile, almost 92% of the total units in euHabitat have also been sold, while the Bassein Rd JV is in the early stage of devt with no recognition of revenue expected in FY12. Armed with fresh dry powder post restructuring (cash boost of $308m qoq from the divestment of its 3 hospitality assets), the house expects to see more involvement from FEOR and its partners in govt land sales biddings moving fwd. Maybank KE keeps at Buy, raises TP to $3.09 from $2.82. Continues to like FEOR for the following reasons: (1) Possible synergies with its parent, who is Singapore's largest private developer, (2) Clear focus post-restructuring, with emphasis on residential development (26% GAV), healthcare (23% GAV) and hospitality mgt (24% GAV), (3) FEOR’s future healthcare assets make a potential beneficiary to rising medical tourism, (4) Undervalued, with net cash already at $1.05/sh and 0.22086 YHS shares fetching another $0.66/sh (assume priced at $3.00).