$BUKIT SEMBAWANG ESTATES LTD(B61.SI)$
A diamond in the rough
Bukit Sembawang (BSEL) offers compelling value at 0.86x P/NAV (below historical mean of 0.94x). BSEL is equipped with a sizeable land bank of over c.240,000 sqm slated for coveted landed homes. The group has enough inventory to sell for the next decade, with the land pegged at extremely low historical costs (we estimate an RNAV of S$10.76/share).
Dividend normalisation expected. With strong sales across its landed development projects in the past year and a pipeline of new projects, i believe BSEL may maintain dividends in the range of 18-33Scts/share, implying a “REIT-like” yield of 4-7%. As BSEL’s land bank is utilised, i estimate that long-term investors could receive c.70% of their capital from holding on to BSEL for the next decade.
Pivot to recurring income a welcome strategy. The group intends to pivot towards building a recurring income base, starting from Frasers Residence Orchard, which could generate revenues of c.S$11m per annum. With net cash of c.S$300m even after paying the declared dividend, BSEL can gear up to fund acquisitions. Assuming a target net debt-equity ratio of 0.3x-0.6x, the group has potential firepower of S$750m – S$1,190m.
DYODD
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