LHN

LHN's 4Q16 net profit surged to $9.2m (4Q15: $0.8m) from a low base, buttressed by fair value gains.

Revenue grew 1.1% to $26m, lifted by facilities management sales of $3.4m (+25.9%) from increased security services and car park contributions, as well as from improved logistics contributions of $4.3m (+19.4%), mainly from increased container depot turnover.

This was offset by lower space optimisation revenue of $18.3m (-5.7%) due to the expiry of leases.

While gross margin expanded 5.8ppt to 25.1% on lower rental costs, this was largely negated by increased operating expenses. Notably admin expenses rose 26.7% to $6m from higher depreciation and staff costs.

Bottom line was boosted by $9.2m of fair value gains, of which $7.1m was attributable at the associates' level, from investment properties. The balance $2.1m is attributable to a one-off revaluation of its industrial properties in Singapore.

On prospects, management is cautious, given intense rent pressures amid weak supply-demand dynamics.

However, 38 Ang Mo Kio Industrial Park 2 (acquired May '16), as well as Four Star Industries (acquired Oct '16) are expected to be operational and contribute in FY17. Four Star Industries includes a 6-storey flatted factory building, to which LHN can optimise.

Meanwhile, LHN is also expecting to expand its GreenHub office brand to a fourth location in Beach Road in Feb '17, together with the branch at 10 Raeburn Park. In total, these will add another 200 workstations, bringing its Singapore workstations to 606.

LHN is trading at ~13x core FY16 P/E.