Sunday, May 17, 2009

Wheelock Properties - Buy by DBS Vickers (15 May 09)

At a Glance
• 1Q09 in-line, excluding further S$23m impairment on investments in SC Global and HPL
• Net cash of S$497m or 42 cents per share
• No plans for launches this year, expects office rentals to remain competitive until 2011
• Maintain BUY, TP S$1.49

Comment on Results

1Q09 In-line Excluding Impairments. Wheelock’s reported a 42% yoy fall in 1Q09 net profit to S$9.8m, while topline climbed 31% yoy to S$85.1m. The key expense to note was a further impairment charge made on its investments in SC Global (S$10m) and HPL (S$13m). Total investments are now impaired down to S$119m (or 10 Scts/shr). Excluding this, earnings would have been S$33m, +96% over 1Q08, due to the higher profit margin for Scotts Square. This formed c.22% of our FY09F and c.24% of consensus.

Flushed With Cash. Wheelock will maintain its strategy of keeping a strong cash position. Net cash of S$497m translates to 42 Scts/shr, enabling it to pursue all investment and development opportunities. No Launches. Wheelock has no plans to launch any projects this year. Meanwhile, Wheelock Place continues to generate good recurring income – it is 99.7% committed with 76% of office and 87% of retail reversions for 2009 confirmed. In terms of outlook, the company does not expect prime residential prices to improve this quarter. It also expects office rentals to remain competitive until 2011, and new retail supply to impact market retail rent levels.


Maintain BUY, TP S$1.49. Its strong cash position allows Wheelock to defer launches of its projects without pressure. Given its track record, we expect Wheelock to expand its landbank at some point, taking advantage of lower land valuations. We reiterate our BUY call, taking its historical average discount to RNAV of 25% (prev 30%) for a TP of S$1.49 based on RNAV of S$1.98 (prev S$1.82).

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