SINGAPORE (May 25): Maybank Kim Eng Research is keeping its “buy” call on Bukit Sembawang Estates (BS) with an unchanged target price of $8.55, representing an upside of 39% from its current trading price.
The target price is based on a 20% discount to Bukit Sembawang’s revalued net asset value (RNAV) of $10.71.
“With a solid $2.6 billion development pipeline, we see BS’s earnings at an inflection point,” says analyst Derrick Heng in a report on Friday.
Bukit Sembawang on Thursday evening announced a ninefold surge in 4Q18 earnings to $21.5 million.
This was on the back of higher sales and higher profit recognition on development projects, which led a doubling of 4Q revenue to $32.8 million.
In addition, other operating expenses fell 78.0% to $1.5 million in 4Q on the absence of allowance for foreseeable losses on development properties during the current quarter.
See: Bukit Sembawang reports 4Q earnings surge to $21.5 mil on higher revenue
“BS has a good mix of projects to ride the recovering housing market,” says Heng. “Revenue recognition from these projects will drive a clear rebound in earnings over the next few years.”
Meanwhile, the board has recommended a final dividend of 4 cents per share for the period and a special dividend of 14 cents per share – significantly lower than a year ago, when Bukit Sembawang paid out a final dividend of 4 cents per share and a special dividend of 29 cents per share.
However, Heng opines that the DPS cut is a “mild negative”.
“Management opted to conserve cash and declared a smaller DPS of 18 cents,” says Heng. “While the DPS cut was slightly negative, we believe BS can quickly pay down financing for its newly-acquired sites with the cash savings.”
As at 11.22am, shares of Bukit Sembawang are trading 1 cent lower at $6.16, implying an estimated price-to-earnings ratio of 9.9 times and a dividend yield of 2.9% for FY19.
