S I N G A P O R E

R e t a i l

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Tuesday, 15 April 2014

MONEY TALK

BUY

SINGHAIYI (SINX SP)

(Initiate Coverage)

Investing In Undervalued US Assets

Share Price

S$0.174

Target Price

S$0.240

Upside

37.9%

We initiate coverage on Singhaiyi with a BUY and a target price of S$0.240, pegged to a 20% discount to our RNAV/share. We see potential upside from more earnings-accretive acquisitions.

COMPANY DESCRIPTION

INVESTMENT HIGHLIGHTS

•

•

•

Buying jewel assets at bargain prices. Via an established network in the US, Singhaiyi creates shareholder value through its savvy investments in undervalued assets at attractive costs. The group bought three US properties at a steep discount to their market value, with an aim of reviving these properties through proper redevelopment. One of them is TriCounty Mall, the second-largest mall in Cincinnati, Ohio. With an occupancy rate of 84%, Singhaiyi’s purchase price of US$45m has an attractive implied yield of 11%. The company’s recent acquisition of a land parcel with a 50%-occupancy office block in San Francisco and redeveloping it into a Continuing Care Retirement Community (CCRC) will provide Singhaiyi recurring income by 2017. Sold-out property developments provide good earnings visibility. The company has launched four residential properties in Singapore, of which two were fully sold, providing good earnings visibility for the next two years. The remaining two projects, Pasir Ris One and CosmoLoft, are currently 70% and 10% sold respectively. We believe the impact to our target price is limited as the unsold units from these two projects contribute only 2.5% of our total RNAV. Pasir Ris One is a DBSS public-housing project with an average selling price of S$650psf (GDV: S$280m), while Cosmo Loft is a freehold private condo with a GFA of only 32,000sf (GDV: S$53m). Shifting its focus. Turning its sights to the more resilient and upbeat retail and office segments, Singhaiyi recently acquired a 20% stake in centrally located TripleOne Somerset. With our property analysts expecting office rents to rise 10-15% yoy this year, and the retail rental market remaining resilient, we believe there is room for further upside in the property’s rental income, especially after its planned asset enhancement initiative.

Singhaiyi is a premium property developer and investor, with assets in Singapore and the US. Using a valueadded approach, together with strategic partners; the group has five local property development projects and a 20% stake in the retail mall TripleOne Somerset in Singapore. The group also owns a retail mall, residential property development project and a CCRC in the US. GICS sector

Financials

Bloomberg ticker:

SINX SP

Shares issued (m):

2,863.5

Market cap (S$m):

498.3

Market cap (US$m):

397.7

3-mth avg t’over (US$m):

0.6

PRICE CHART (lcy)

SINGHAIYI GROUP LTD

Singhaiyi Group Ltd/FSSTI Index

0.30

(%) 120 110

0.25

100 90

•

Net profit to surge. Net profit jumped from S$0.04m in FY12 to S$4.3m in FY13 on a fair value gain of S$3.7m on the group’s investment property. Net profit should see a sharp jump to S$29.9m in FY14 due to strong revenue booked from the Charlton property project, a provisional gain of S$12.8m on the bargain purchase of Tri-County Mall and US$10.6m in revaluation gain of 5 Thomas Mellon in the US. However, the group also recognised a nonrecurring expense of S$5.1m for share-based payments and S$1.1m finders’ fee paid to MEM Energy Partners LLC for the acquisition of Tri-County Mall. Stripping out all one-off items, we expect Singhaiyi to report a net profit of S$10.1m, vs S$0.6m in FY13.

KEY FINANCIALS

0.20

80 70

0.15 100

60 Volume (m)

50 0 Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

Feb 14

Apr 14

Source: Bloomberg

Year to 31 Mar (S$m)

2012

2013

2014F

2015F

2016F

Net Turnover EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (cent) PE (x) P/B (x) Dividend Yield (%) Net Margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%)

0.9 -0.8 1.5 0.0 0.0 0.02 n.a. n.a. 0.0 4.84 n.a. -0.61 0.00

17.1 2.9 6.4 4.3 0.6 0.32 n.a. n.a. 0.0 3.72 48.50 5.55 4.30

40.3 24.6 17.5 29.9 10.1 0.35 49.2 1.19 0.0 25.11 (35.12) 49.39 10.41

309.6 40.1 39.5 26.8 26.8 0.94 18.6 1.12 0.0 8.66 16.48 12.36 6.22

58.6 22.1 21.5 19.5 19.5 0.68 25.5 1.07 0.0 33.33 32.57 4.15 4.30

Source: Bloomberg, UOB Kay Hian

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ANALYST Brandon Ng, CFA +65 6590 6615 [email protected]

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Valuation We initiate coverage on Singhaiyi with a BUY and a target price of S$0.24, pegged to a 20% discount to our RNAV/share. This is based on: a) discounted cash flow (WACC: 8.0%) from the sale of its development properties, and b) the revaluation of its investment properties on rental assumptions. We estimate property selling prices and construction costs based on external sources and publicly available data. In our valuation, we have priced in all its developments on hand, including the newly-bid executive condominium (EC) project at Anchorvale, Sengkang, that has yet to be launched. We set a 20% discount to our RNAV of S$0.30 to take into account potential execution risks in property development, possible delays due to market conditions and regulatory risks from any new property cooling measures by the government. FIGURE 1: RNAV Asset Valuation Development Projects

Stake (%)

Charlton Residences Pasir Ris One CityLife @ Tampines CosmoLoft Seng Kang EC Vietnam Town

80 80 24.5 90 80 100

Investment Properties Triple One Somerset Tri-County Mall 5 Thomas Mellon CCRC Sub-total

Year of completion FY14 FY15 FY16 FY17 FY18 FY18

20 100 100

NPV of Dev. Profits (S$m) 10.7 35.2 22.5 12.3 47.0 45.5 Surplus to Book (S$m) 62.0 85.0 147.1 467.3

Net Book Total RNAV/share (S$) Target Price (at 20% discount to RNAV) (S$)

382.5 849.8 0.300 0.240

Source: Singhaiyi, UOB Kay Hian FIGURE 2: SENSITIVITY TABLE TO VARIOUS WACC AT 20% DISCOUNT TO RNAV WACC Target Price (S$)

4% 0.25

6% 0.245

8% 0.240

10% 0.235

12% 0.230

Source: Singhaiyi, UOB Kay Hian FIGURE 3: PEER COMPARISON Singapore-Listed Chip Eng Seng Corp Ltd Sim Lian Group Ltd Soilbuild Construction Group Tuan Sing Holdings Ltd Tiong Seng Holdings Ltd Average US-Listed Arbor Realty Trust Inc Ares Commercial Real Estate Armada Hoffler Properties In Amreit Inc Cons Tomoka Land Co-Florida First Real Estate Inv Tr Nj China Hgs Real Estate Inc Homefed Corp One Liberty Properties Inc Reis Inc Average Singhaiyi Group Ltd

S$ S$ S$ S$ S$

Share Price (Lcy) 0.765 0.865 0.25 0.345 0.195

Market Cap (US$m) 392.0 694.5 132.5 322.9 143.1

PE FY13 (x) 6.8 5.0 6.3 7.7 16.3 8.4

PE FY14 (x) n.a. n.a. n.a. n.a. 27.9 27.9

P/B FY13 (x) 1.0 1.0 n.a. 0.5 n.a. 0.8

US$ US$ US$ US$ US$ US$ US$ US$ US$ US$

6.96 12.85 9.75 16.49 39.97 19.5 5.66 48 21.84 17.88

348.9 366.9 187.7 323.7 227.1 135.0 255.0 713.6 346.6 197.7

S$

0.174

397.7

17.8 17.8 25.0 19.9 62.5 18.2 12.3 33.6 19.0 11.0 23.7 37.8

13.1 11.7 34.8 51.5 n.a. n.a. n.a. n.a. 23.2 57.7 32.0 n.a.

0.9 0.9 n.a. 1.4 1.9 9.1 2.6 2.1 1.3 2.1 2.5 1.9

Source: Bloomberg, UOB Kay Hian

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Buying jewel assets in the US at bargain prices. Singhaiyi creates value for shareholders by investing in undervalued assets in the US through American Pacific International Capital (APIC). APIC is a diversified international investment holding company with businesses throughout the US and China. Some of its investments include KOIN building in Portland, five boutique hotels in San Francisco, as well as a luxury hotel-Ocean Panorama and multiple high-rise residential development projects in Shantou, China. APIC board members include Mr Gordon Tang (Chairman/CEO), Mr Neil Bush, Mr Wilson Chen (President of APIC), Mr Jinshan Mao (Vice President, APIC) and Ms Huaidan Chen. APIC has over 20 years of experience in the US and is wholly-owned by Singhaiyi’s controlling shareholders. Currently, Singhaiyi has the right of first refusal for any real estate project in the US encountered by APIC but Singhaiyi’s board of directors will have to approve all investment deals before Singhaiyi can commit to the transaction. Mr Neil Bush, son and brother of two US presidents, is the Non-Executive Chairman of Singhaiyi. FIGURE 4: INVESTMENT PROPERTIES IN THE US US property investments Tri-County Mall

Location

Property type

Cincinnati, Ohio

Retail mall

Vietnam Town

San Jose, California San Francisco, California

5 Thomas Mellon CCRC

Land size (sf) 3.3m

Acquisition Price (US$m) 45.0

Market Value (US$m) 55.2

Residential

853,502

33.05

-

CCRC

204,300

24.4

35.0

Remarks Recognised S$12.8m gain on bargain purchase Valuation by Colliers International

Source: Singhaiyi Singhaiyi acquired Tri-County Mall in end-Sep 13 through a court auction for US$45m (or US$43.5psf), a hefty 77% discount to its net book value of US$193.9m. Tri-County Mall is the second-largest mall in Cincinnati, Ohio, with a gross leasable area of 1.26m sf. Macy’s, Dillard and Sears are the anchor tenants, occupying 59% of the mall. Prior to the acquisition, Tri-County Mall was operated for 16 months by a court-appointed receiver, during which, eight tenants left the mall. Since Singhaiyi took over the mall on 27 Sep 13, occupancy rate has risen from 70% in Jul 13 to 84% as of 27 Nov 13. Based on the annualised EBITDA of US$5.2m and current occupancy rate of 84%, the purchase price of US$45m has an attractive implied yield of 11.6%. According to Colliers, overall retail vacancy rate in Cincinnati continued to trend down to 8.94% in 4Q13, while average rental rate increased slightly to US$11.89psf. FIGURE 5: CINCINNATI VACANCY RATE (LEFT), AVERAGE RENTAL RATE (RIGHT)

Source: Colliers We also believe there is room for further upside in rental income with proper AEI, new tenants and the redevelopment of its gigantic carpark with 7,118 parking lots.

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FIGURE 6: PROJECT HIGHLIGHTS OF TRI-COUNTY MALL Gross leasable area

1.26m sf

Singhaiyi owns 1m sf

Anchor Tenants

Macy’s

Occupies and owns 227,072sf

Dillard

Leased 235,850sf

Sears 84%

Leased 285,480sf

Current occupancy rate (ex Macy)

Source: Singhaiyi, yelp.com Vietnam Town. Started in 2005/06, the developer of Vietnam Town lost funding for the project and was placed under receivership. Sitting on a freehold land of 853,502sf, Vietnam Town is a 256-unit partially completed commercial-cum-condominium project, of which 115 units had been built and 64 were sold. Like Tri-County Mall, Singhaiyi purchased Vietnam Town through an auction for US$33.05m. The consideration is for the 51 remaining unsold units and the uncompleted portion of the project. Singhaiyi intends to sell the 51 units in 1-2 years, and use the sales proceeds to construct the remaining 141 units in Vietnam Town over the next 3-5 years. FIGURE 7: US NEW HOME SALES

FIGURE 8: CASE-SHILLER HOME PRICE INDICES (NOT SEASONALLY ADJUSTED)

1600

250 1400

200 1200

1000

150

800

100 600

50

400

200

1/ 1/ 4/ 200 1/ 4 7/ 200 10 1/20 4 /1 04 / 1/ 200 1/ 4 4/ 200 1/ 5 7/ 200 1 1 0 /2 0 5 /1 05 / 1/ 200 1/ 5 4/ 200 1/ 6 7/ 200 10 1/20 6 /1 06 / 1/ 200 1/ 6 4/ 200 1/ 7 7/ 200 10 1/2 7 /1 00 / 7 1/ 200 1/ 7 4/ 200 1/ 8 7/ 200 1 1 0 /2 0 8 /1 08 / 1/ 200 1/ 8 4/ 200 1/ 9 7/ 200 10 1/20 9 /1 09 / 1/ 200 1/ 9 4/ 201 1/ 0 7/ 201 1 1 0 /2 0 0 /1 10 / 1/ 201 1/ 0 4/ 201 1/ 1 7/ 201 1/ 1 10 20 /1 11 1/ /201 1/ 1 4/ 201 1/ 2 7/ 201 1 1 0 /2 0 2 /1 12 / 1/ 201 1/ 2 4/ 201 1/ 3 7/ 201 1 1 0 /2 0 3 /1 13 /2 01 3

Source: Bloomberg

Ja n04 Ju l-0 Ja 4 n05 Ju l-0 Ja 5 n0 Ju 6 l-0 Ja 6 n07 Ju l-0 Ja 7 n08 Ju l-0 Ja 8 n0 Ju 9 l-0 Ja 9 n10 Ju l-1 Ja 0 n11 Ju l-1 Ja 1 n12 Ju l-1 Ja 2 n13 Ju l-1 3

0 0

Source: Bloomberg

US housing market recovery. 2013 saw the US housing market recover strongly as home prices rose about 12%, driven by investors capitalising on cheap foreclosed properties. According to Freddie Mac, the US housing recovery is likely to continue in 2014. However, the recovery in house prices will likely slow from last year but national indices are still expected to rise about 5%. Given the expected continued recovery in the US housing market, we are optimistic on the sales of Vietnam Town in the coming year. Based on back-of-the-envelope calculation, with an average unit size of 1,000sf, estimated selling price of US$550psf and investment period of five years, Vietnam Town will yield an attractive annualised return of 18.6%. FIGURE 9: VIETNAM TOWN’S TOTAL RETURN ON INVESTMENT ANALYSIS Amount invested Amount returned No. of years Total profit Annualised return on investment

US$33.05m US$77.55m 5 US$44.5m 18.6%

141 units x US$550psf x 1,000sf

Source: UOB Kay Hian w w w . u t r a d e . c o m . s g

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CCRC at 5 Thomas Mellon Circle. Lastly, Singhaiyi announced its third US acquisition of 4.7 acres of prime land at 5 Thomas Mellon Circle for US$24.4m from APIC to be developed into a Continuing Care Retirement Community (CCRC). The land parcel was valued at US$35m as at 21 Feb 14 and the project has a gross development value of US$600m. Upon approval from relevant authorities, the project will have 528 units divided into independent living, assisted living memory support and skilled nursing and rehabilitation beds. Singhaiyi intends to keep the project as an investment property with recurring monthly revenue of US$3,500-US$7,500 per unit, depending on the services rendered. Residents of these homes will also have to put up refundable cash deposits of US$500,000 to US$1m per unit as entrance fees to secure a place in the retirement community. While this sector is not as common in Singapore, the CCRC concept has been available to US citizens since 1970s. According to the National Investment Centre for the Seniors Housing & Care Industry, there are currently about 2.9m units in the US, with the total market capitaliation of this sector estimated at US$250b-270b. Occupancy rates for these units have also been healthy at 89.7% for seniors housing and 87.9% for nursing care. FIGURE 10: PROJECT HIGHLIGHTS OF CCRC

Source: Singhaiyi, UOB Kay Hian FIGURE 11: PROJECT TIMELINE OF CCRC 2014

2015

2016

2017

2018

• Land acquisition

• Construction of CCRC property

• Construction of CCRC property

• Construction of CCRC property

• Full operation of CCRC

• Approvals from authorities • Secures 90% loan financing from commercial banks • Construction starts

• Marketing starts with the collection of refundable entrance fees

Source: Singhaiyi, UOB Kay Hian Demand for seniors housing and care is driven by a growing seniors population resulting from the baby boom as well as increased life expectancy. As of 2010, 6% of the US population, or about 19.0m were aged 75 years or older. The level of seniors in this age group will continue to grow at a steady pace for the next 10 years, at which point, the percentage of seniors in the age group is projected to grow at a much more significant rate due to the ageing of the baby boomers.

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FIGURE 12: GROWTH OF THE AGE 75+ POPULATION IN THE US

Source: US Census Bureau Sold-out property developments in Singapore provide good earnings visibility. Singhaiyi has launched four residential properties in Singapore, of which two were fully sold, providing good earnings visibility for the next two years. The remaining two projects, Pasir Ris One and CosmoLoft, are currently 70% and 10% sold respectively. We believe the impact to our target price is limited as the unsold units from these two projects contribute only 2.5% of our total RNAV. Pasir Ris One is a DBSS public-housing project with an ASP of S$650psf (GDV: S$280m), while Cosmo Loft is a freehold private condo with a GFA of only 32,000sf (GDV: S$53m). FIGURE 13: LAUNCHED PROJECTS IN SINGAPORE Project

Singhaiyi’s stake (%)

% sold (%)

Charlton Residences Pasir Ris One CityLife@Tampines CosmoLoft Anchorvale

80 80 24.5 90 80

100 70 100 10 To be launched

Expected year of completion FY14 FY15 FY16 FY17 FY18

Source: Singhaiyi Expanding its Singapore property portfolio through prudent competitive bidding. With the slew of cooling measures taking its toll on residential properties, our property analysts believe 2014 may see residential sales volumes moderating 20-40% yoy with prices correcting 5-10% yoy as investment demand slows. While Singhaiyi is eager to expand its property portfolio, the company is tendering for new projects through prudent yet competitive bids, given the cautious outlook on the local residential property segment. In its most recent tender, Singhaiyi won with the top bid of S$192.9m (S$367psf ppr) for an EC project at Anchorvale, near Sengkang MRT. This is just 1.1% above the second-highest bid of S$363psf ppr by MCL Land. Industry players expect this project could be launched at ASP of S$810-860psf. We have conservatively forecast ASP at S$830 psf.

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FIGURE 14: NEW EC PROJECT IN SENGKANG, SINGAPORE

Cheng Station

Lim

LRT Sengkang MRT and Compass Point

Source: Housing & Development Board Shifting its focus. With the challenging outlook on the residential segment, Singhaiyi is shifting its sights to the more resilient and upbeat retail and office segments through its most recent investment in TripleOne Somerset. Recurring rental income. Singhaiyi is part of a conglomerate which recently purchased the centrally located TripleOne Somerset for S$970m. With a net property income of about S$40m, this translates to a rental yield of about 4%. Singhaiyi is expected to commence recognition of rental income from 1 Apr 14 (FY15). FIGURE 15: CENTRAL LOCATION OF TRIPLEONE SOMERSET, SINGAPORE Singhaiyi’s stake

20%

Description

Tenure

17-storey commercial building (2 office towers and 2 levels of retail space) Retail: 117,940sf Office: 648,610sf 61 years remaining

Current occupancy rate

Above 90%

Annual net property income

S$40m

AEI Budget

S$150m

Gross floor area (sf)

Source: TripleOne Somerset, Singhaiyi, UOB Kay Hian

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FIGURE 16: URA RENTAL INDICES BY SEGMENT

Source: URA Office rentals on an uptrend. After bottoming out in 2013, our property analysts expect office rents to rise 10-15% yoy this year. Island-wide occupancy level is also expected to increase from 90% in 2012 to 94% in 2017 as the average annual supply of 1.7m sf p.a. falls short of demand. The retail rental market is also expected to remain resilient as our property analysts forecast rentals to rise 0-3% yoy in 2014, supported by stable retail demand and moderate new supply of larger malls. Retail rents were flattish (0.1% qoq, -0.9% yoy) in 4Q13 but occupancy level increased to 95.5% (3Q13: 94.3), which suggest improving demand/supply dynamics. Room for further upside in rental income from TripleOne Somerset. With a positive segment outlook coupled with the central location of TripleOne Somerset, we believe there is room for further upside in rental income, especially after the planned asset enhancement initiative (AEI). As part of its planned AEI, the consortium is exploring the option of building an underground pedestrian link between TripleOne Somerset and Somerset MRT. We believe this will significantly increase the human traffic to the building, which could further support upward rental reversions.

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Earnings And Financials Revenue rose from S$0.9m in FY12 to S$17.1m in FY13 as Singhaiyi recorded sales proceeds from the Charlton project. The group had entered into sales contracts for all 21 units of its Charlton Project in Mar 12 and progressively billed and recognised approximately 27% of the sales revenue in FY13. We forecast its revenue to increase to S$40.3m in FY14 as remaining sales from the Charlton project (100% sold) will be subsequently recognised in FY14 and FY15. Rental income from the Tri-County Mall will also contribute positively to the group’s revenue as the investment property was acquired only on 30 Sep 13. FIGURE 17: REVENUE AND GROSS PROFIT 31 Mar (S$m) 350.0 309.6 300.0 250.0 200.0 150.0 100.0 58.6

40.3

50.0 0.9 1.5

17.1

39.5

21.5

17.5

6.4

0.0 2012

2013

2014F

Net Turnover

2015F

2016F

Operating profit

Source: UOB Kay Hian Net profit jumped from S$0.04m in FY12 to S$4.3m in FY13 on a fair value gain of S$3.7m on the group’s investment property. Net profit should see a sharp jump to S$29.9m in FY14 due to strong revenue booked from the Charlton property project, a provisional gain of S$12.8m on the bargain purchase of Tri-County Mall and US$10.6m in revaluation gain of 5 Thomas Mellon in the US. However, the group also recognised a non-recurring expense of S$5.1m for share-based payments and S$1.1m finders’ fee paid to MEM Energy Partners LLC for the acquisition of Tri-County Mall. Stripping out all one-off items, we expect Singhaiyi to report a net profit of S$10.1m, vs S$0.6m in FY13. FIGURE 18: NET PROFIT AND NET MARGIN 31 Mar (S$m) 100.0

40

90.0 33.3

80.0

30

70.0 25.1

25

50.0

20

40.0

15

26.8

30.0 20.0 4.8 0.0

10.1

8.7

(%)

60.0

10.0

35

19.5

10 5

0.6 3.7

0.0

0 2012

2013

2014F

Net profit (adj.)

2015F

2016F

Net Margin (%)

Source: UOB Kay Hian

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Singhaiyi held S$306m in cash and cash equivalents as at 30 Sep 13 after raising S$193m in a rights issue. Net cash-to-equity increased to 40.6%, from a net debt-to-equity of 48.5% in FY13. However, we expect the cash level would decline after the company announced several projects, such as its investments in TripleOne Somerset, the EC project at Anchorvale, Sengkang, and the CCRC project at 5 Thomas Mellon in the US. Net debt-toequity should normalise to 16.5% in FY15 after a net cash-to-equity of 35.1% in FY14. FIGURE 19: NET DEBT/EQUITY 31 Mar (%) 60.00 50.00

48.5

40.00

32.6

30.00 16.5

20.00 10.00 0.00 (10.00)

2013

2014F

2015F

2016F

(20.00) (30.00) (40.00)

(35.1) Net debt/(cash) to equity (%)

Source: UOB Kay Hian FIGURE 20: KEY FINANCIALS Year to 31 Mar (S$m)

2012

2013

2014F

2015F

2016F

Net Turnover EBITDA Operating profit Net profit (rep./act.) Net profit (adj.) EPS (cts) P/E (x) P/B (x) Dividend Yield (%) Net Margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%)

0.9 -0.8 1.5 0.0 0.0 0.02 n.a. n.a. 0.0 4.84 n.a. -0.61 0.00

17.1 2.9 6.4 4.3 0.6 0.32 n.a. n.a. 0.0 3.72 48.50 5.55 4.30

40.3 24.6 17.5 29.9 10.1 0.35 49.2 1.19 0.0 25.11 (35.12) 49.39 10.41

309.6 40.1 39.5 26.8 26.8 0.94 18.6 1.12 0.0 8.66 16.48 12.36 6.22

58.6 22.1 21.5 19.5 19.5 0.68 25.5 1.07 0.0 33.33 32.57 4.15 4.30

Source: Bloomberg, UOB Kay Hian

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Company Profile Singhaiyi is a premium property developer and investor, with assets in Singapore and the US. Formerly known as SingXpress Land, the group entered Singapore’s property scene in 2010, successfully riding the local property boom with four residential development projects launched in Singapore - two of which were fully sold. FIGURE 21: SINGAPORE DEVELOPMENT PROPERTIES

Source: Singhaiyi Business strategy. Singhaiyi creates value for shareholders through investing in undervalued assets. By investing in these assets, Singhaiyi is able to create maximum value through the redevelopment of these properties. The group’s “value-creation” strategy is evident in Singhaiyi’s US investments – Tri-County Mall in Ohio and Vietnam Town in California, both of which were placed under receiverships and auctioned off. FIGURE 22: TRI-COUNTY MALL (LEFT) AND VIETNAM TOWN (RIGHT), US

Source: Singhaiyi Risks Forex. With property investments in the US, Singhaiyi is exposed to forex risk. Profitability may be affected if the US dollar depreciates against the Singapore dollar. Dependent on the outlook of Singapore and US property markets. With all its investments being properties in Singapore and the US, Singhaiyi is dependent on the outlook of the property markets in both countries. Weakness in either market may affect the profitability of the company.

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MONEY TALK

Bloomberg Consensus Recommendation 31/03/2013 Target Price Upside Income Statement Revenue Gross Income Operating Income Pretax Income Net Income Adjusted* EPS Adjusted Dividends Per Share Payout Ratio (%) EBITDA

3/12 1 -1 0 -0 0.00 0.00 0 -1

Buy 0%

Sell 100%

Hold 0% 0.15 -16%

3/13 17 6 2 6 4 0.01 0.00 0 2

3/14E

3/15E

Price @ 14 Apr 14

Valuation Ratios P/E EV/EBIT EV/EBITDA P/S P/B Div Yield

3/12 433.3 21.6 1.5 0.0%

3/13 63.3 273.8 247.6 15.9 3.1 0.0%

3/14E -

3/15E -

Profitability Ratios % Gross Margin EBITDA Margin Operating Margin Profit Margin Return on Assets Return on Equity

-92.2 -97.1 4.8 -

33.7 13.0 11.8 25.2 1.5 4.3

-

-

Peer Comparison

Ticker

Chip Eng Seng Corp Ltd Sim Lian Group Ltd Soilbuild Construction Group Tuan Sing Holdings Ltd Tiong Seng Holdings Ltd Average Singhaiyi Group Ltd

CHIP SP SLG SP SOIL SP TSH SP TSNG SP

0.765 0.865 0.250 0.345 0.195

Market Cap (US$m) 392.0 694.5 132.5 322.9 143.1

SINX SP

0.174

398

-----PE----FY12 FY13 (x) (x) 6.2 6.8 3.4 5.0 5.6 6.3 3.6 7.7 6.0 16.3 5.0 8.4 755.3 37.8

Price Earnings Ratio (3 years average)

-----P/B----FY12 FY13 (x) (x) 1.1 1.0 1.1 1.0 8.0 n.a. 0.6 0.5 0.7 n.a. 2.3 0.8 2.5 1.9

Yield FY13 (%) 5.2 5.3 n.a. 1.4 n.a. 4.0 -

Price to Book Ratio (3 years average) 4.00

250.00

3.50

200.00 3.00 2.50

150.00

2.00

100.00

1.50 1.00

50.00 0.50

0.00

0.00

Ap Ju rn11 11

Au Oc De Fe Ap gtcbr11 11 11 12 12

Ju n12

Au Oc De Fe Ap gtcbr12 12 12 13 13

PE Ratio (x)

Ju n13

Au Oc De Fe gtcb13 13 13 14

3 Yr Average

Ap Ju rn11 11

Au Oc De Fe Ap Ju tcbrng11 11 11 12 12 12

Au Oc De Fe Ap gtcbr12 12 12 13 13

PB Ratio (x)

Ju n13

Au Oc De Fe gtcb13 13 13 14

3 Yr Average

Source: Bloomberg, UOB Kay Hian

Technical View SingHaiyi Group (SINX SP, 5H0) The stock has had a 10-for-1 share consolidation from 20 Mar 14. The stock is likely to be well supported at S$0.16 for further upside towards S$0.21/0.25 should the stock rebound from its potential prior resistance-turned-support level near S$0.16.

Source: Nextview

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