Positioning for its future
- FY21 PATMI up 41.8% y-o-y to S$83.7m as Robinson Point sale closes
- Australia reopening to drive Hospitality recovery
- GulTech stake sale completes, primed for potential IPO in 2023
- Maintain BUY with slightly lower TP of S$0.63
Investment Thesis:
Potential IPO of GulTech to crystallise hidden value. Since our initiation back in June 2020, Tuan Sing’s share price has risen c.100%. We still see upside with a few catalysts ahead. The sale of a stake in GulTech Jiangsu to strategic partners could position the unit for an IPO while potential redevelopments at Grand Hyatt Melbourne and Link@896 could lift NAV.
Transformation into partial tech play in progress. GulTech’s earnings have grown by a CAGR of c.16% in the past five years. While Tuan Sing’s share of profit in GulTech could decline to a forecasted S$24.0m due to the partial stake sale, GulTech’s earnings growth may potentially accelerate further with help from its partners.
Resilient property market. The Singapore private property market has held up well amid the pandemic, and a successful sales launch of Peak Residence could catalyse share price.
Valuation:
Our TP of S$0.63 is based on SOTP. We assume a valuation of 16.0x FY22F PE for GulTech, a 60% discount to RNAV of S$937.5m. Our TP represents a P/NAV of 0.60x compared to 0.43x currently.
Where we differ:
We are the only broker covering the counter. That said, we have assumed more conservative valuations for Tuan Sing and with a 60% discount to RNAV.
Key Risks to Our View:
Resurgence of COVID-19 infections could lead to construction delays, factory and hotel disruptions, FX risk, soft office market