Allgreen Properties: Geared To Go

Wednesday, September 2, 2009

All Ready To Go. We met Allgreen management recently and came away assured that it remains in a good position to take advantage of current momentum in the mid-tier segment, given its enviable number of launch-ready projects. Net gearing remains low at 0.46x and management indicated it would be comfortable gearing up to 0.65x. Based on its 2Q09 balance sheet, it provides debt headroom of c. S$500m for any potential acquisitions. Its participation in the Chestnut Ave tender shows it is not averse to supplementing its landbank.

Visibility Improving. While FY09F earnings from its development properties segment will largely be underpinned by revenue recognition from Cairnhill Residences (TOP end-09), Cascadia and Pavilion Park, recent success at One Devonshire and VIVA will provide earnings visibility going into FY10F and FY11F. Potential launches in the pipeline will also contribute, as will its share from JV projects in China, which we believe could boost earnings from late FY10 onwards.

BUY, TP S$1.39. With four launch-ready projects in various locations, we believe Allgreen is poised to capitalise on buoyant sentiment in the mid-tier segment and realize its fair value. Any success in subsequent mass-market land tenders will likely be RNAV-accretive and provide a further catalyst for the stock. Allgreen remains our top mid-cap pick, with a TP of S$1.39.

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