Tuan Sing

Tuan Sing ($0.415): 4Q net profit slipped 4% y/y to $24.3m, mostly due to lower non-recurring fair value adjustments (FVA). Profit before tax and FVA is $26.5m (vs 4Q13 $3.5m), boosted by doubling in gross profit, one-time gain in negative goodwill ($26.9m) from the acquisition of Grand Hotel Group (GHG) and higher contribution from associates, offset by higher operating expenses and finance costs. Revenue surged 72% to $112.1m, reflecting faster progressive revenue recognition (by POC method) at three Singapore residential properties Seletar Park Residence (SPR), Sennett Residence (SR) and Cluny Park Residence (CPR) in the property segment, and maiden contribution ($12.0,) from the two five-star hotels Grand Hyatt Melbourne and Hyatt Regency Perth held under GHG. Operating expenses ballooned 15x to $22.9m due to consolidation of GHG and acquisition expenses amounting to $17.8m. Finance costs increased due to interest on additional borrowings used for acquisition of Robinson Point in 2013 and GHG in 2014. Share of profits from associates amounted to $6.1m (vs $0.4m in 4Q13, which includes $5.9m loss from corporate guarantees given to Pan-West’s bankers), contributed equally by GHG (pre-acquisition) and GulTech. Pan West continues to record accumulated losses that exceeded Tuan Sing’s cost of investment and contractual obligation. Also the result of recent acquisitions, net borrowings increased $451.8m to $1.1b and net gearing climbed from 0.80x at Sep14 to 1.34x at Dec14. Market may have priced in the high gearing as the stock is now trading at 0.6x P/BV, lowest among peers. Going forward, total order book of $763.2m (vs $750.3m in Sep14) will be progressively recognized as construction continues. SPR is expected to be completed by FY15, SR in 2016 and CPR in 2018. 43.3%-owned GulTech will commence its production run for printed circuit boards in its new plant in Wuxi, China. Tuan Sing maintained its first and final dividend at 0.5₵ per share.