Revenue rose sharply as a result of the progressive recognition of projects that have been substantially sold, namely The Coast and Paradise Island in Sentosa Cove. Net profit increased because of higher revenue partially offset by a write-down of S$109.8m in fair value changes of properties.
Earnings estimates for FY2009F to FY2011F. We expect Ho Bee to report record profit of S$380.3m in FY2009F as it recognizes revenue from most of its projects in Sentose Cove. Following that, it is likely to remain profitable as it recognises profits from the remaining projects. We anticipate profit of S$90.0m and S$33.3m for FY2010F and FY2011F respectively.
Outlook for FY2009F. Ho Bee mentions that it expects to be profitable for the next two quarters this year. Moreover, it has re-launched The Orange Grove and Dakato Residences, and achieved sales of more than 20% each. We expect the strong sales momentum to continue for its residential projects.
Maintain HOLD recommendation, fair value raised from S$0.85 to S$1.17. We maintain our hold recommendation for Ho Bee as the share price has run up sharply in the recent rally and we believe that upside may be limited. Due to the improvement in sentiment in the property market, we raise the fair value from S$0.85 to S$1.17. This is based on a reduction in the discount from 50% to 40% of the RNAV. The RNAV has also been revised from S$1.71 to S$1.95 to reflect the higher than expected selling prices of the residential projects.
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