Keong Hong: UOB Kay Hian initiated coverage on the company yesterday with a BUY and TP of $0.565, representing a 25% upside from the current price.
The house cited that Keong Hong went into property development in 2012 and is now starting to see the returns, with a bumper profit set to kick off in FYSep15, as its property development projects obtain TOP.
Through JVs, Keong Hong is in the midst of developing two hotels in Joo Chiat (to be operated by InterContinental Hotels Group under the brands Hotel Indigo and Holiday Inn Express), an airport hotel and a resort hotel in Maldives, which are expected to bring a steady stream of recurring income to Keong Hong upon completion from FY16 to FY17.
Despite being in a cyclical industry, management has consistently paid out between 18-28% of earnings as dividends. With the expected TOP of the Twin Waterfalls development project and Skypark Residences, house expects dividend yield to rise to 8.7% (3.9¢) and 7.3% (3.3¢) in FY15 and FY16 respectively, based on a 25% payout.
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