Ho Bee Land

 

On Sept 3, Ng Noi Hinoy, spouse of Ho Bee Land Ho Bee Land: H13 0% chairman and CEO Chua Thian Poh, acquired 50,000 shares of the company for a consideration of S$139,500.

 

At an average price of S$2.79 per share, this increased the deemed interest of Mr Chua in Ho Bee Land from 75.49 per cent to 75.50 per cent.

 

This followed his increasing his deemed interest with Ho Bee Holdings acquisition of 39,700 shares of Ho Bee Land at an average price of S$2.80 per share on Aug 27.

 

Headquartered in Singapore, Ho Bee has property investments and developments in Singapore, Australia, China, the United Kingdom and Germany.

 

The real estate development and investment company has a portfolio that covers residential, commercial and high-tech industrial projects since its establishment in 1987.

 

On Aug 27, Ho Bee Holdings acquired 39,700 shares of Ho Bee Land Ho Bee Land: H13 0% for a consideration of S$111,160 at an average price of S$2.80 per share.

 

Ho Bee Land chairman and CEO, Chua Thian Poh owns 82.5 per cent of the shares of Ho Bee Holdings.

 

This saw the acquisition marginally increase his deemed interest in Ho Bee Land, which is 75.49 per cent.

 

Ho Bee Holdings' preceding acquisition of Ho Bee Land shares was on May 24, with 133,700 shares acquired at an average price of S$2.54 per share and March 23 with 15,000 shares acquired at S$2.42 per share.

 

Mr Chua is the founder of Ho Bee Group, and was appointed as the group' s chairman and CEO in 1999.

 

On Aug 12, Ho Bee Land announced a net profit after tax and on-controlling interests of S$105.5 million for its H1FY21 (ended June 30), an increase of 16 per cent from H1FY20 due to higher rental income and development profits.

 

With the results, Mr Chua noted that by taking advantage of the buoyant residential market in Singapore, the group has started to sell its apartments in Sentosa Cove with some success.

 

He added that with the new waves of infections caused by the Covid-19 variants, the business environment is still very hazy and challenging. However with international vaccinations gaining pace the group is hopeful that the global economic outlook will improve.

HIGHER rental income and development profits drove a 16.5 per cent increase in Ho Bee Land' s net profit to S$105.5 million for the first half of this year, from S$90.6 million in the year-ago period.

 

Revenue grew 46.5 per cent on the year to S$157.3 million, from S$107.3 million previously, said the mainboard-listed real estate developer and investor in a Thursday filing.

 

Earnings per share stood at 15.89 Singapore cents, up from 13.62 cents in the first six months of last year.

 

Recurring income from its portfolio of offices in Singapore and London continued to underpin the group' s profitability, Ho Bee Land said. Positive rental reversions contributed to a 6 per cent increase in rental income during the half year.

 

However, its ancillary food and beverage tenants' operations were " severely affected" by Covid-19 restrictions in Singapore and London, it noted. " The group will continue to support these tenants with rental rebates over this difficult period," it added.

 

On the development front, contributions from projects drove the improvement in the bottom line, with sales of development properties amounting to S$43.4 million, compared to zero in H1 2020. This largely came from Ho Bee Land' s maiden master-planned community residential project, Parklanes 2, in Queensland, Australia.

 

The group' s share of results of jointly-controlled entities surged to S$50 million, from S$3 million in H1 2020, due mainly to higher profits from the Tangshan project in China. About 700 units in the project' s second phase were handed over to buyers in H1 2021.

 

Chua Thian Poh, Ho Bee Land' s group chairman and chief executive officer, said: " Taking advantage of the buoyant residential market in Singapore, the group has started to sell its apartments in Sentosa Cove with some success."

 

However, the business environment remains " very hazy and challenging" , given the recent new waves of Covid-19 cases caused by variants, he added.

 

No dividend was recommended for the first half, the same as the year-ago period, as the company only considers a final dividend at the end of its financial year.

DBS Group Research analysts Dale Lai and Derek Tan have initiated &ldquo buy&rdquo on Ho Bee Land with a target price of $3.80.

The target price is based on a 40% discount to the brokerage&rsquo s revised net asset value (RNAV) of $6.28, write the analysts in a June 10 report.

 

&ldquo This represents [a] potential upside of 40%. The stock currently trades at price-to-net asset value (P/NAV) of 0.5 times and offers a yield of 4.0%, backed by stable cashflows from its office property portfolio,&rdquo they add.

 

Ho Bee Land has a portfolio that is positioned for the new economy with its seven prime office properties in London&rsquo s CBD. It also owns The Metropolis in Singapore&rsquo s One North.

 

The Metropolis, say the analysts, &ldquo will continue to see growth in the medium term. The asset is also a beneficiary of a pivot towards more suburban locations as companies adopt more flexible working arrangements,&rdquo write the analysts.

 

The group is doubling down its exposure in One North and is currently building a business park catering to the life-science and biotech sectors, which will contribute to earnings upon completion sometime in FY2023.

 

The group has been paying out an annual dividend of 10 cents per share over the past four years, translating to a dividend yield of 

3.8% to 4.5% based on its average five-year trading price, comparable to that of the yields paid out by Singapore REITs (S-REITs).

On that, Lai and Tan note that the group&rsquo s higher dividend yield and faster net asset value (NAV) growth has been largely ignored by the market, compared to its closest developer peer, UOL.

 

&ldquo Compared to the FSTREH and UOL, Ho Bee Land trades at a lower P/NAV multiple of 0.5 times despite offering a higher dividend yield of 4.0% and faster growth in shareholder equity over the past decade,&rdquo they write.

 

&ldquo We see further upside from (i) impending recognition of development profits, (ii) completion of Biopolis development to drive upside to NAV and a re-rating in share price,&rdquo they add.

 

The group is also expected to recognise profits from its pivot towards amassing a significant recurring income base, which will provide a boost to its earnings from the FY2021 to the FY2023.

 

&ldquo Ho Bee Land has close to $1.3 billion of development projects on the books (22% of assets), of which a substantial portion has been sold (mainly in China and Australia),&rdquo say Lai and Tan.

 

&ldquo Riding on the positive sentiment in the Singapore residential space, the group has launched the remaining unsold units at Turquoise in Sentosa, bringing a near term boost to earnings,&rdquo they add.

 

The low interest rate environment and ample capital for deployment opportunities have put Ho Bee Land as a possible take-over target given its &ldquo dominant portfolio characteristics and attractive discount to NAV&rdquo .

 

On this, Lai and Tan have identified three possible catalysts for Ho Bee Land to unlock value.

 

&ldquo Recent share buybacks have brought Ho Bee Land&rsquo s free float down to 25% and possible scenarios are (i) privatisation, (ii) securitization of its income-producing portfolio or (iii) conversion into a &ldquo stapled security&rdquo presents upside of 35%-60,&rdquo write the analysts.