Tuesday, March 10, 2015

Low Keng Huat

Low Keng Huat: (S$0.765) Adding to Yield portfolio on potential bumper dividend
The construction and property group climbed 20% from its low in Oct '14 and is nearing its all-time high of $0.78 set in May 2013.

We hypothesize that investors may be anticipating a special dividend payout in its upcoming FY14 results due end of this month.

9M14 earnings already doubled to $83.5m (8.81¢ eps), while revenue soared almost 8-fold to $459m, mainly boosted by full revenue recognition of Parkland Residences, a DBSS project, upon its TOP in Oct '14.

4Q14 results are expected to be boosted by the full recognition of sales proceeds from commercial development, Paya Lebar Square (office), upon obtaining its TOP. As at 1 Dec '14, only eight of the 556 office units at the premium-grade property remain unsold.

Market Insight estimate LKH would book at least $394m at the top line for its effective 44% stake. This should translate into ~$98.5m at the bottom line; more than its 9M14 earnings.

Assuming a historical dividend payout rate of 30-40%, LKH could reward shareholders with bumper DPS of 7.4¢ for FY14 (FY13: 3¢), giving an effective 9.7% yield.

At $0.765, LKH is valued at 1.03x P/B. There is currently no coverage on the counter but an expected blowout FY14 results and dividends could precipitate a share price re-rating.

As such, Market Insight is adding the stock to its Yield portfolio with an entry price of $0.765.

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