Wednesday, 8 February 2017

GuocoLand - Laggard in property sector resurgence

Over the past month, property developers listed on SGX staged a strong resurgence with many of them nearing / hitting their 52 weeks high. As can be seen from the image below, all of them are within 90% of their 52 weeks high. The more established names such as CapitaLand and CityDev are just whiskers away from theirs.

Closing price as at 7 February vs 52 weeks High
Had been contemplating investing in the property sector since valuations had been severely depressed due to Total Debt Servicing Ratio (TDSR) and Additional Buyer Stamp Duty (ABSD) implemented by the government to stablise housing prices and keep them affordable to avoid a housing bubble. With Budget 2017 releasing soon, it appears that many are hoping for the polices to take a softer stance.

Unfortunately, being absorbed by work over the past month meant missing out on the recovery of the bulk of the sector. I took a look at financial reports of WingTai and GuocoLand, stocks that still have some room before hitting their 52 weeks high, and decided to invest in GuocoLand on 7 Feb 2017. I chose not to invest in WingTai as they have exposure to the retail segment which I'm not so keen on. I prefer a pure property play for this current stock pick.

Some Highlights of GuocoLand

1. Low Price to Book
2. Sustainable dividends (information extracted from poems):

3. Shareholding structure (extracted from SGX StockFacts):

Company's interest is aligned with shareholders since 72.49% of shares is owned by parent, making them a possible takeover target.  

4. Key Excerpts extracted from Financial Report 2016
Chairman's Statement: Supporting the Group's growth strategy is a prudent capital management approach to maintain a healthy financial position. The Group's debt has been reduced by $1.45 billion as compared to a year ago, while total cash has increased by $767 million. With strong cash flow from operating and investing activities, the Group's gearing ratio has been halved from 1.5 times as at 30 June 2015 to 0.7 times as at 30 June 2016
The Group continues to execute its strategic goals of growing recurring income through investment properties to sustain future growth, as well as to realise capital value of its investments when opportunities arise.
Wallich Residence, SIngapore's tallest luxury residences at Tanjong Pagar Centre expected to receive its TOP in the fourth quarter of 2016. The official launch is expected to take place in early 2017 when construction is complete and potential buyers will be able to experience first-hand the true value of owning an asset in Singapore's newest landmark.
Key Risks:
1. Residential projects in Singapore are mostly concentrated on prime districts which requires higher outlay and restrict the pool of available buyers
Current Launch
New Launch

2. Property market continues to be lacklustre with no signs of cooling measures being relaxed in the near term.

Disclaimer: I'm currently vested in GuocoLand. The above information are based on my limited understanding and does not constitute a buy or sell call. Always do your own due diligence before taking any actions. 

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