SingLand's revenue jumps 21% to S$173.7m

CIMB says new sales and higher recognition of The Trizon boosted profit.

Fourteen units were sold in 2Q11, taking take-up to 79%.

Here’s more from CIMB:

In line; maintain Outperform. 2Q11 core net profit of S$67.8m meets consensus and our expectations, at 37% of our FY11 forecast. 1H11 core net profit forms 64% of our number. We are expecting project sales to slow down in 2H11. Profit was boosted by new sales and higher recognition of The Trizon. Positives included a strong hospitality performance, partially neutralised by negative office rental reversions, as expected. Its CBD office portfolio has been revalued upwards by 4-9% though asset values are still generally 2-7% below their 2007 peak. We keep our earnings estimates and target price of S$10.22, still pegged at a 15% discount to RNAV. While the office leasing momentum appears to have slowed, we see value at 0.6x P/BV vs. its 2005-6 average of 1x. Balance sheet remains strong. Catalysts could come from higher office rentals.

• Boost from The Trizon. Revenue rose 21% yoy to S$173.7m, on higher sales and recognition of The Trizon. Fourteen units were sold in 2Q11, taking take-up to 79%. As sales of the project are nearly completed, management could be focusing next on its 50%-owned acquired project in Bedok. Riding the hospitality uptrend, revenue in Pan Pacific Singapore increased 4% yoy on the back of stronger occupancy and room rates.

• Negative rental reversions for offices. While the negative rental reversions were expected, there was a larger yoy and qoq decline in gross rental income to 6% and 3%. Echoing comments from the other office S-REITs which have been observing a slowdown in the office leasing momentum, management has turned more cautious and is now guiding for a moderation in office rentals amid upcoming office supply.

• Remain constructive on valuations. While the office leasing momentum could have slowed, we believe downside will be capped by its near-distress valuations.Though we value SingLand’s key office assets at S$1.5k-2.3k psf cap values,current valuation of 0.6x P/BV appears to price in all its office assets near distress levels, including Singapore Land Tower at S$1.5k psf, SGX Centre at S$1.2k psf, Clifford Centre at S$1.2k psf and Gateway at S$0.9k psf. This is unjustified, in our view, further considering a mere net gearing of 6% as at end-2Q11.

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