Soilbuild Group Holdings Ltd: Sturdy results amid weak property market

By Foo Sze Ming
Thu, 19 Feb 2009, 08:52:35 SGT

Soilbuild Group reported a good set of results for 4Q08. 4Q08 PATMI increased by 60% YoY to S$30.5m but excluding revaluation gains, underlying PATMI would have increased by 48% YoY to S$9.6m. Espa, which obtained its TOP in January 2009, had also been handed over to the buyers, without any buyers defaulting. Regarding Soilbuild’s short term liquidity needs, we believe that these could be met when it receives payment upon the completion of its residential projects in 2009 and also using its untapped credit facilities of S$150m. Using Soilbuild’s end-FY08 book value, our FY09 RNAV is now pegged at S$1.58. We are maintaining RNAV discount at 50% and our fair value of Soilbuild is now pegged at S$0.79. Soilbuild has also announced a total dividend of 4 S-cents for FY08 (dividend yield of 7.4%). As the share price now offers an upside potential of 46.6%, we are upgrading Soilbuild from HOLD to BUY.

Strong 4Q08 results. Soilbuild Group reported a good set of results for 4Q08. Revenue grew by 46% YoY to S$50.0m, underpinned by the progressive recognition of revenue from Leonie Parc View (LPV), Montbleu, Centrio and Espa. Although revenue fell short of our expectation of S$80.2m, this was due to the difference between the completion status of the projects and our recognition schedule and we expect the shortfall to be recognised in the coming quarters. A one-off gain of S$25.6m from the revaluation of Tuas Connection factories was recognised in this quarter. 4Q08 PATMI increased by 60% YoY to S$30.5m but excluding revaluation gains, underlying PATMI would have increased by 48% YoY to S$9.6m.

No buyer defaults on recently completed project. Despite the weak property market and rising concern on buyers default, Soilbuild managed to hand over all the units in Espa, which TOP in January 2009, to the buyers, without any buyers defaulting. Soilbuild had also been prudent in managing the payment risks for its residential projects by requiring downpayment of 20% of purchase price from buyers and not offering the Deferred Payment Scheme for subsale.

Short term liquidity needs can be met. As at the end of FY08, Soilbuild had borrowings of S$186.8m (~45.9% of total borrowings) due within a year and the amount could increase by S$43.5m if its convertible bond holders exercise their option for an early redemption of the bond in July 2009. However, we believe that Soilbuild’s near term liquidity needs could be met when it receives payment upon the completion of its residential projects in 2009 – LPV and Centrio. Also, Soilbuild still had untapped credit facilities of S$150m at the end of FY08, which could also be utilized for refinancing.

Attractive valuation with decent dividend yield. Using Soilbuild’s end-FY08 book value, our FY09 RNAV is now pegged at S$1.58 (previously S$1.54). We are maintaining RNAV discount at 50% as outlook remains challenging in the property sector and our fair value of Soilbuild is now pegged at S$0.79 (previously S$0.77). Soilbuild has also announced a total dividend of 4 S-cents for FY08 and base on yesterday’s closing price, this translates to a dividend yield of 7.4%. We believe that the dividend yield could be sustained as Soilbuild progressively builds up its recurring income from business space over the next few years. As the share price now offers an upside potential of 46.6%, we are upgrading Soilbuild from HOLD to BUY.

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