How Courts Asia will benefit big-time from Singapore's housing boom

54,000 home units to be completed by 2014.

According to CIMB, Courts Asia is enjoying the boom in completed housing units in Singapore. It is also looking to expand regionally for additional earnings growth.

Here's more:

Our Outperform and target price from residual income valuation are unchanged (8% cost of equity, 1% terminal growth) with catalysts to come from faster-than-expected SSSG and store expansion.

Singapore contributes the most. Earnings growth is expected from: 1) SSSG in Singapore; and 2) regional store expansion further out. Courts should continue to benefit from more completed housing units in Singapore over the next few years and store expansion in Malaysia and Indonesia.

Management plans to expand retail space by 15% (120,000 sf) annually over the next two years with the bulk in Malaysia and Indonesia. A recently issued S$125m fixed-rate note should allow management to extend more credit in Malaysia and Indonesia.

The availability of credit is crucial to sales in these two markets. Boom in housing completions Singapore’s completed housing units will rise from an average of 20k-25k p.a. (2009-12) to 40k-54k p.a. in the next two years.

Courts is a market leader in electrical, IT and household goods. Singapore contributes the most to its earnings despite lesser high-margin credit sales because of higher sales psf in stores and a more efficient cost structure. FY13 SSSG of 8.3% should be sustainable.

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