Retail remains as Singapore Land's most promising sector

Amid tepid office and hotel growth.

Maybank Kim Eng notes that there has been relatively flat growth in rental and hotel income, at least looking at latest 2Q13 results, with little upside seen in both sectors.

Instead, Singapore Land's retail exposure will likely properl the group's coming quarters' incomes.

Here's more from Maybank:

Results unexciting and in line with expectations. SingLand reported a 2Q13 core PATMI of SGD48.3m (-3% QoQ; +14% YoY), after excluding net revaluation gains of SGD98.9m. 1H13 core PATMI of SGD97.9m was in line with expectations, making up 48% of our fullyear estimates. We expect core operations to remain relatively flat in 2H13, with few positive catalysts in sight. Maintain HOLD.

Stronger uplift in recurrent income expected from FY15. On a QoQ basis, SingLand reported relatively flat growth in rental and hotel income. We see little upside from office rental reversion and management is cautious about the outlook for the hotel industry on the back of slower visitor growth, new supply pressure and the ongoing labour crunch. The bright spark is likely to come from its retail exposure, but the extension wing at Marina Square is expected to be completed only in 4Q14.

Residential sales have been weak. Sales at SingLand’s 109-unit Mon Jervois have been weak, with 10 units sold as of June (out of 22 units launched) at an ASP of ~SGD2,100 psf. Nonethless, we expect SingLand to launch another two projects in this year, namely the 445-unit JV with UOL at Bright Hill Drive called Thomson Three (est. ASP SGD1,500 psf) and its own development at Farrer Drive to be known as  Pollen & Bleu (est. ASP of SGD1,800 psf).

Getting closer to privatisation? SingLand’s parent company, UIC, continued to inch-up its stake up until 12 July, and UIC now has an 80.3% stake in the company. Including Silchester’s 8.2% holdings, SingLand’s free float now stands at 11.5%, merely 1.5% away from the required 10% minimum free float to remain listed. We expect UIC to continue to chip away at the free float should the share price remain at current levels.

Maintain HOLD. We tweak our TP to SGD9.75, pegged to a 25% discount to RNAV on the back of higher valuations for Marina Square, but due to the lack of near-term catalysts for the stock, we maintain our HOLD recommendation.