We are positive overall on SingHaiyi’s foray into fund management with ARA.
- Maintain BUY with an unchanged RNAV-derived SGD0.18
- We think this is a good move for the company to diversify its business segments and also extend its geographic reach to Malaysia from Singapore and the US currently.
- Given that this nascent segment is still small, there is no material impact to our TP.
Kick-starts fund management segment with ARA Harmony Fund III (ARA).
- SingHaiyi has subscribed for a 25% interest as a limited partner (LP) in ARA Harmony Fund III for MYR120m (SGD45m) alongside other LPs such as ARA Real Estate Investors XI Ltd, SRE Venture 5 Pte Ltd, and an entity wholly-owned by Mr Gordon Tang and Madam Chen Huaidan.
- SingHaiyi has also acquired a 35% stake in the general partner (GP) of this fund for SGD48. There are five Malaysian commercial properties located in Kuala Lumpur, Selangor, Ipoh and Malacca under the fund.
Small steps but a first.
- According to our estimates, the new fund management segment constitutes only 4.4% of our RNAV and a SGD7.5m surplus. This adds 0.26 cents to our RNAV, which is insignificant to move our TP.
Pasir Ris One is 90% sold.
- There have been recent complaints over flaws and lack of corridor space on the design, build and sell scheme (DBSS) project Pasir One after its temporary occupation permit (TOP) in May, in which SingHaiyi has a 80% stake (Kay Lim Holdings: 20%).
- This was on the heels of other DBSS projects that have been plagued by similar woes such as Centrale 8 in Tampines and Trivelis in Clementi. The 447-unit project was launched in Apr 2012 and a unit costs between SGD390,000-770,000.
- SingHaiyi has come out to state that designs and plans for the development had been approved and fell within the guidelines stipulated by Building & Construction Authority (BCA).
- Nevertheless, it took the residents’ views seriously and, in some instances, offered to upgrade or switch units for customers under duress.
Maintain BUY.
- We noted the reputational risk on the developer and, on a conservative basis, wrote-off the 10% units that remained unsold. This effectively trimmed off SGD4m, or 0.14 cents from our RNAV.
- Our RNAV-derived TP, nonetheless, remains unchanged at SGD0.18.
- Maintain BUY.
(Ong Kian Lin)
Source: http://www.rhbgroup.com/
