More positive guidance on strong property sales. Revenue for the quarter grew 14% yoy to S$85m as presale proceeds from its recent property launch began to stream in. The group has been relentless in capitalising on much-improved sentiment, launching One Devonshire (ASP S$1,770psf) in June and more recently, Viva at Suffolk Walk (ASP S$1,550psf). Demand for these projects has been robust, with 148 of the 152 units launched and 162 of the 235 units launched sold respectively. Management guides for a much better 2H09 vs. 2H08.
Hotels remained weak. Hotel occupancy and room rates continued to drop. We believe occupancy at its Traders Hotel may have fallen to 60-70% currently.
Balance sheet and cash flow. Net gearing was stable at 0.45x as a lower cash balance was offset by the recognition of presale proceeds. Operating cash flow in 2Q09 turned positive. Allgreen also paid a further S$20m to its JV companies in Chengdu and Shenyang for its stake in the China projects developed with Kerry Properties. Allgreen is likely to pay a further S$130m-150m in equity, with the remaining S$500m-600m development capex secured through debt.
More launches to sustain momentum; maintain Outperform. We adjust our FY09-11 core EPS estimates by -21% to +12% on changes to our recognition schedule. We raise our end-CY10 RNAV and target price from S$1.32 to S$1.38 on higher-than-expected ASPs achieved for Viva. Allgreen has a strong pipeline of mass-mid-tier inventory ready for launch. We believe Holland Residences and RV Residences could be released to good take-up in 2H09. The stock remains our top mid-cap pick in the sector. Maintain Outperform.
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