KSH Holding's PATMI soared 179% to S$8.1m

Thanks to its property development segment.

KSH reported 3Q FY13 PATMI of S$8.1m, which surged 179% YoY mostly due to contributions from its property development segment as the group recognized earnings from The Boutiq, Cityscape@Farrer Park and Rezi 26. 9M FY13 earnings now cumulate to S$22.3m, up 108.3% YoY and forming 73% of our FY13 forecast.

Here's more:

Topline for the quarter came in at S$48.9m, which also increased 68% YoY mostly due to an increase in contributions from the construction segment.

The group has sold a significant portion of launched projects, and we expect progress billings from already sold projects to underpin earnings growth ahead.

Cityscape@Farrer Park, a major project in KSH’s portfolio, is about 67% sold to date, while Sky Green at Macpherson and Palacio are 96% and 71% sold, respectively. Looking ahead, we expect the group to launch Hong Leong Garden, Seletar Garden and King Albert Park.

Though the residential market is currently in a state of flux after recent cooling measures, we note that these three projects contain significant commercial components which would likely perform well.

The group recently cinched a contract win for Q Bay Residences, which boosted its construction order book by ~45% to ~S$461m as at 31 Jan 2013.

Given the recent white paper on population growth indicating an increased population of 6.5m – 6.9m by 2030, we expect construction
demand to remain firm over the long term as Singapore continues to ramp up infrastructure and housing growth. Fair value estimate increased to S$0.62.

Maintain BUY with an increased fair value estimate of S$0.62, versus S$0.50 previously, as we lower the RNAV discount for its property segment from 50% to 40% to reflect a lower risk profile given a larger percentage of projects sold, and raise our PE multiple for its construction segment from 3.0x to 4.0x - a level closer in line with that of its peers. (Eli Lee)

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