PhillipCapital initiates &lsquo buy&rsquo on Wee Hur Holdings with TP of 62 cents

The investment holding company was listed on the Mainboard in 2008. Its operating segments include building construction, workers&rsquo dormitory, property development, fund management and purpose-built student accommodation (PBSA) operations. Building construction was the largest contributor to Wee Hur&rsquo s revenue in the 1HFY2024 ended June 30 at 41% followed by workers&rsquo dormitory, which contributed 39%.

To Yik, Wee Hur&rsquo s worker&rsquo s dormitory segment remains a &ldquo key growth driver&rdquo with higher rental rates in FY2024 and a higher bed capacity expected to materialise by the end of FY2025. The group&rsquo s second purpose-built dormitory (PBD), Pioneer Lodge, is its second one with 10,500 beds. It is expected to be partly operational by 1Q2025 and fully operational by the end of this year.

&ldquo We expect revenue and patmi for the workers&rsquo dormitory segment to increase by [around] 40% CAGR (or compound annual growth rate) from FY2023 to FY2025,&rdquo says Yik. &ldquo There is upside to our target price if the remaining two-year lease of the 15,744-bed Tuas View Dormitory is extended.&rdquo

Wee Hur, which recently secured an A$1.6 billion ($1.36 billion) exit from its PBSA portfolio, could net $320 million in proceeds and a one-off gain from sale of $36 million, Yik notes.

The move could also improve the group&rsquo s financial position, bringing it to net cash of $259.3 million from its current net debt of $60.6 million.

&ldquo Given the group&rsquo s track record of declaring special dividends during strong financial performance, we believe there is a strong likelihood that special dividends may be announced,&rdquo he writes. &ldquo Notably, in FY2012, the Group reported around $90 million gain from sale from the completion of the Harvest@Woodlands industrial development project and subsequently distributed $15.9 million in special dividends.&rdquo

Following the sale of its PBSA portfolio, Wee Hur will see a 10.6% increase in its revised net tangible assets (NTA) to 73 cents from 66 cents. &ldquo Based on the average 0.9 times P/B of the group&rsquo s comparables, this represents a 56% upside in valuations based on current stock prices,&rdquo says Yik.

&ldquo Given the successful agreement to realize value from its PBSA portfolio, we believe the group is well-positioned to leverage its expertise and experience to maximize the potential of its remaining tangible assets,&rdquo he adds.

At its closing price of 42 cent as at Yik&rsquo s report dated Jan 3, the stock is trading around 36% below its book value.

As at 2.31pm, shares in Wee Hur are trading 3 cents higher or 7.14% up at 45 cents.