Hafary Holdings

Hafary Holdings: 1QFY15 net profit surged 59.6% y/y to $3.2m, riding on a 15.1% improvement in revenue to $27m, driven by improved sales of tiles and building materials in both the general (+2.3%) and project (+28.2%) segments. Meanwhile, gross profit margin improved 0.5 ppt to 39.1%. In relation to its 46%-owned leasehold land at 18 Sungei Kadut Street 2, redevelopment plans by Jurong Town Corporation are underway for an International Furniture Park at the Sungei Kadut Industrial Estate, turning it into Southeast Asia's international furniture hub. This augurs well for the group, which remains on track to redevelop the property in 2Q15 to hold 300,000 sf gfa, comprising 250,000 sf of industrial and 50,000 sf as white site. Market watchers estimate that the building is likely to achieve TOP in 2H16. On the positive set of results, management declared an interim DPS of 1¢, compared to none in the previous corresponding period. Group also guided for a healthy business outlook in the current quarter. Recall, the investment merit of Hafary is premised on its market position as a leading tile supplier in Singapore, making it a prime beneficiary of the 110,000 new residential units that is expected to be completed by 2016. Hafary also has in its stable, six warehouse properties (five located in Singapore and one in China). Given the lower inventory holding costs in China, the group is exploring plans to hold more inventories in its China warehouse, potentially freeing up space on its domestic warehouses and possibly monetizing some of its local assets. By analyst estimates, the RNAV of Hafary’s properties are worth at least $119.4m versus its current market cap of $94.4m. At $0.22, Hafary trades at 7.3x forward P/E and 2.3x P/B.