Ho Bee Investment

Friday, July 10, 2009

Sold retail units at Kovan Centre. Recently, Ho Bee sold 37 freehold strata retail units at Kovan Centre at Yio Chu Kang Road for S$22.2 million. Ho Bee had bought the retail units from First Capital Corporation (now GuocoLand) in 1999 for S$18.8 million. The sale price of S$22.2 million was below our estimate of S$25 million. In May 2009, Ho Bee sold five units at the Orange Grove at Stevens Road/Orange Grove Road at a median price S$2,320 psf.

Earnings estimates for FY2009F to FY2011F. As Ho Bee recognizes revenue from residential projects that have been sold, it is anticipated to remain profitable for the next three years. We expect it to report net profit of S$174.6m, S$65.2m and S$62.8m for FY2009F, FY2010F and FY2011F respectively.

Recommendation. We currently have a hold recommendation on Ho Bee as it has not sold a large number of properties recently and there may be a decline in sale prices of its luxury properties. However, due to the strong sales in the property market recently, we have raised the fair value to S$0.85, which is 50% discount to the RNAV of S$1.70. If Ho Bee launches its properties and the sales prove to be strong, this can be a catalyst to upgrade our recommendation and fair value on the stock.

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