SINGAPORE (Aug 25): KGI is maintaining its “buy” call on SUTL Enterprise with a target price of $1.04 on the back of better 2Q17 performance.
The operator of marinas posted a 15% increase y-o-y in its 2Q17 earnings to $690,000 mil on lower expenses, which raised net profit 7% y-o-y to $1.48 million.
See: SUTL Enterprise posts 15% increase in 2Q earnings to $0.7 mil
The group’s ONE15 Puteri Harbour membership pre-sales were delayed due to changes in regulations which required further legal due diligence.
Management is however optimistic that the approval for both construction and pre-sales will be obtained by December.
In a Friday report, analyst Colin Tan says, “The project is expected to complete by 2019 and we should start to see earnings from Puteri Harbour by early 2020.”
Although no indicative price was disclosed, management expects to launch with 6,000 memberships.
To recap, prior to the launch of ONE15 Marina Sentosa which was built for about $80 million, the group managed to sell 3,000 memberships for a total of $117 million.
Based on this, the analyst predicts that management could possibly sell the Puteri Harbour memberships at a price that could cover 140% of the construction costs, or RM48,400 ($15,405) per membership.
There was also a delay in launching the ONE15 Brooklyn Marina private club membership sales as the management was facing issues finding a suitable vessel for the floating clubhouse.
Otherwise, the marina is in operations with its sailing school and other facilities.
The analyst forecasts the membership sales for ONE15 Brooklyn Marina to contribute to pre-tax gains of $3.5 million in FY18.
“SUTL remains undervalued with upside catalysts that include strong recurring earnings contribution from its various marina projects in the near future,” says Tan.
As at 10.30am, shares in SUTL are trading 4 cents lower at 70 cents.
The stock is trading at 1.1 times FY17F earnings with a dividend yield of 2.7%.