Hafary

Hafary: OSKDMG INITIATES coverage with Buy call and $0.35 TP, representing an upside of 67%. Hafary is a market leader in tile supply in Singapore, offering a wide range of tile and related products for home renovation, private property development and public sector projects. Hafary also owns a portfolio of six property assets with a potential valuation surplus of $58.1m. Hafary supplies a wide array of tile and flooring products for home renovation, private property development and public sector refurbishment needs. Founded in 1980, Hafary has demonstrated a strong track record in identifying interior decorative trends and managing working capital and inventory. Its tile supply business typically yields 8-12% net margins and we forecast stable revenue and earnings trends from FY15-17F. Hafary has accumulated five properties in Singapore and one in China over the past four years, mainly for warehousing purposes. The portfolio of properties has a book value of $61.3m, with a valuation surplus of another $58.1m. Most of the valuation surplus would pertain to two properties: 105 Eunos Ave 3 and 18 Sungei Kadut Street 2 (which will undergo redevelopment). The house values Hafary using SOTP, valuing its tile supply business and property development assets separately. Peg its tile supply business to 10x FY15F P/E, deriving a FV of $71.6m. Then add on the book value and valuation surplus of the properties, minus the debt pertaining to property and derive a FV of $152.2m or TP of $0.35 per share on Hafary.