KSH Holdings to acquire 30% stake in Changi Road project

It will join Lian Beng and TEE International in the consortium.

According to OCBC Investment Research, KSH would acquire a 30% stake in 160 Changi Rd located at the corner of Changi Rd and Lorong 105 Changi. The consortium comprises KSH (30%), Lian Beng (40%) and Tee Intl (30%) and would acquire 160 Changi for S$68m. 

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The site is zoned “Commercial” and has a land area of 17,974 sq ft with plot ratio 3.0. The group intends to redevelop the site into a mixed retail and office project. 

We believe the redevelopment would consist of 50:50 retail and office components, and estimate the overall breakeven price to be S$1.75k psf.

Assuming a selling price of S$2.8k and S$1.8k for retail and office, respectively, this project has an estimated net profit margin of 20%, on an overall basis, and would accrete 1.5 S-cents to KSH’s RNAV. 

We like that KSH has re-deployed capital expendiently into new projects after raising S$13.9m from a placement of new and treasury shares in mid-Mar 2013.

Over the last two weeks, the group has increased its stake in its Beijing condominium project (Liang Jing Ming Ju, Phase 4) from 26.2% to 45.0% for S$1.9m, and acquired a 30% stake in 160 Changi Rd for S$20.4m.

In our view, this points to a well thought-out plan for capital management and growth, particularly as KSH bought back a significant number of shares into its treasury at S$0.22 - S$0.32 in late 2012 and placed them out at S$0.408 to private investors in Mar 2013.