Allgreen Properties - Mass appeal

Tuesday, July 7, 2009

Large Mid-Tier Landbank. Allgreen Properties is our top mid-cap pick among the property developers. With an attributable landbank of just under 2 million sqft that is mainly skewed towards the mid-tier and mass-market residential segments, Allgreen is in a good position to capitalise on the current buoyant interest in these segments of the physical market. As a testimony to the appeal of its landbank, its recent launch of One Devonshire, an upper mid-tier property offering, was about 85% taken up at around S$1,750 psf.

Fundamentals Remain Sound. We remain confident of the demand fundamentals for the mid-tier and mass- market segment, and we have adjusted our ASPs upwards in line with our expectations of a recovery in the physical market, the premise of our sector upgrade call back in April. Allgreen is poised to take advantage of continued interest in the physical market with two more projects launch-ready – Holland Residences and RV Residences – both within the mid-tier segment. Its balance sheet remains strong with gearing at 0.4x, and it continues to trade below its net book value of S$1.44.

Maintain BUY, TP S$1.35. Our RNAV for Allgreen has been revised upwards to S$1.68 (from S$1.25), as we embark on the next phase of our RNAV recovery cycle with upward adjustments of ASPs. We maintain our 20% discount to RNAV, for a revised target price of S$1.35 (from S$1.00). Maintain BUY.

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