SINGAPORE (Aug 23): NRA Capital has an "overweight" rating for TEE Land with a fair value of 32.5 cents, after the group’s FY2016 earnings came in above the brokerage’s forecasts.

Analyst Liu Jinshu is expecting TEE Land to post earnings growth for FY2017 ended May, given the contribution from wholly owned projects such as Hilbre28 and Third Avenue, with potential catalysts arising from the sale of existing properties and investments.

That said, TEE Land recorded a $2.9 million loss in FY2016 after the joint venture for the [email protected] I and II was dissolved. TEE Land was granted full ownership of Peak I at the expense of giving up its 27% stake at Peak II.

Liu noted that 61.5% of units at Peak I were sold, which meant that the group would be subjected to a $0.47 million Qualifying Certificate extension charge in FY2017 from the property. For its remaining properties, TEE Land would be subjected to QC extension charges from FY2019.

“Based on the pace of property sales in FY16, these other properties should not pose a risk to TEE Land,” says Liu.

On top of that, TEE Land has also been cutting back on its land banking activities in recent years as it completes its current projects. This would help replenish cash in the group’s balance sheet.

About $30 million of TEE Land’s term notes are due in October 2017, and Liu says he is “confident” that the group will be able to repay them.

“Given the company’s now more conservative stance, additional catalysts may stem from the disposal of investments such as TEE Land’s hotels in Sydney and the unutilized portion of the Third Avenue site,” writes Liu on Tuesday.

However, Liu warns that TEE Land’s biggest risk lies in its potential placement on the Singapore Exchange’s Watchlist if it is unable to fulfil the minimum trading price criteria.

“TEE Land is trading at a 45% discount from its book value, which excludes any redevelopment upside,” says Liu. “We anticipate that the progressive monetisation of TEE Land’s projects will help to narrow the discount from book value”.

Shares of TEE Land are trading 2.6% higher at 19.9 cents on Tuesday.