Hiap Hoe

Hiap Hoe: DMG has a BUY with TP of $0.79, based on a 40% discount to RNAV of $1.32, given the higher commercial property weighting and limited residential exposure given healthy presales. House notes that the recent sale of Ibis Novena to the Kum family, for $150m for a 241-room 3 star-hotel translated to per key valuation of $622,000. The biggest hospitality player in the Balestier enclave is currently Hiap Hoe (HH)/Superbowl, who between them own 2 hotels, the 405-room Days Hotel and the 384-room Ramada Singapore, together with some 120,000 sf of commercial space at Zhongshan Park. Days Hotel is currently operational while Ramada Singapore is expected to commence business in 1H13. DMG have previously valued Ramada Singapore at $600,000/key and Days Hotel at $500,000 per key. With the latest transaction and taking into account recent valuations by other hospitality operators, DMG now raise their valuation to $650,000/key for Ramada and $550,000/key for Days Hotel. This translates into a valuation uplift of $18m, or 4cts/share, for Hiap Hoe. DMG notes the recent round of cooling measures to impact on Group’s residential sales, its 2 major projects, Skyline 360° and Waterscape at Cavanagh, is currently 64% and 75% sold, respectively, with healthy pretax margin of over 40%.