Ho Bee

Ho Bee: OSKDMG highlights that amidst the doom and gloom in the real estate sector with declining home prices and transactions, Ho Bee is well-positioned to sail through the current storm serenely with its growing portfolio of investment properties. Its crown jewel is the Metropolis office property in Buona Vista with NLA of 1,1m sqft. Built at a cost of under SGD800m, the property is currently over 95% committed and will provide a gross income stream of SGD84m on a stabilized basis. In the past 18 months, the group has also purchased three prime office properties in London at a total cost of GBP281m: Rose Court in May 2013, 1 St. Martin’s Le Grand in March this year, and 60 St. Martin’s Lane last month. Estimate its London properties will boost its net income stream by another SGD30m. Its investment property portfolio will be able to generate an annual net income stream of SGD0.16/share, translating to attractive earning yield of 8.2%. Beyond its investment properties, Ho Bee is sitting on three other residential projects in Sentosa, where it is currently renting out unsold units due to the sluggish market. In Australia, the group owns over 1.2m sf of residential landbank in Melbourne and Gold Coast, which it is currently developing for sale. The group’s exposure to China is mainly through joint venture projects with Yanlord. At current levels, the stock is trading at a 44% discount to its NTA and a 50% discount to our RNAV. Recommend an Accumulate on the stock with a $2.47 TP, premised on a 35% discount to its RNAV. Upside in its NAV will be driven by further revaluation gains for Metropolis, which is currently valued at a reasonable SGD1,172 psf.