Better-than-expected prices and take-up. Allgreen has sold more than 95% of its 152-unit One Devonshire at an average price of ~S$1,800psf since the launch earlier in June, which was a better result than expected. This drives the upgrade to our earnings estimates and target price. Both the deferred payment and interest absorption schemes were available at a price premium, but most buyers opted for the normal progress payment scheme, suggesting demand from owner-occupiers.
Mid-market developer, well-positioned at current point in cycle. Future launches over the next 3–6 months include mid-market projects RV Residences, Holland Residences and Handy Road, which we believe are well-positioned to sell into the current buying momentum.
Office remains weak, but retail operations stable and resilient. Though asking rents for Great World City office at the city fringe have continued to weaken to about S$7psf currently, lower passing rents have helped to stave off negative rent reversions. Great World City retail and Tanglin Mall remain close to full occupancy, with positive rental reversions of 3–5% still expected, underpinning the expected dividend payment of S¢2 this year.
FY09–10E EPS raised by 11–14%, due mainly to higher-than-expected sales and prices at One Devonshire. Our target price is raised to S$1.13 based on an unchanged 25% discount to a slightly higher RNAV of S$1.51 (S$1.48 previously).
12-month price target: S$1.13 based on a RNAV methodology. We like Allgreen for its mid-market exposure, which is well-positioned to ride the current buying momentum, and as we view the stock as a proxy to Singapore residential. Upgrade to Outperform.
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