Ho Bee Investment Ltd

Positive 1Q2013 Results

BloombergReuters POEMS HOBEE SPHBEE.SIHBI.SG Industry: Property Phillip Securities Research Pte Ltd 3 May 2013
Ho Bee Investm ent Ltd Rating - Previous Rating Target Price (SGD) - Previous Target Price (SGD) Closing Price (SGD) Expected Capital Gains (%) Expected Dividend Yield (%) Expected Total Return (%) Raw Beta (Past 2yrs w eekly data) Market Cap. (USD mn / SGD mn) Enterprise Value (USD mn / SGD mn) 3M Average Daily T/O (mn) 52 w eek range (SGD) Closing Price in 52 w eek range 0% 2.40 2.20 2.00 1.80 1.60 1.40 1.20 1.00 50% 100% 8 7 6 5 4 3 2 1 0 1 1 2.52 2.29 2.160 16.7% 2.3% 19.0% 0.85 1188 / 1465 1406 / 1736 0.7 1.08 - 2.18 Buy Buy

Report type: Quarterly Results

Company Overview Ho Bee Investment Ltd is a real estate development and investment company with an extensive and diverse portfolio covering high quality residential, commercial and high-tech industrial projects.

1Q13 revenue $60.8mn, up 68.4%y-y 1Q13 PATMI $52.1mn, up 230.1%y-y Expect weak local residential sales for FY2013 as unsold inventories remain concentrated in Sentosa Recent divestments, and lowered net gearing indicates potential for more overseas development possibilities. Recent topping-out ceremony of The Metropolis, with expected completion (reval. gain) in 3Q2013. Maintain at Buy at higher fair value of $2.52

What is the news? Ho Bee reported 1Q13 PATMI of S$52.1mn. This represents a 230.5% y-y increase, mainly attributed to the S$32.7 million disposal gain in its China investment, Chongbang Holdings. Higher revenue recognition coming from development projects, Trilight (residential) and One Pemimpin (industrial), resulted in S$60.8mn revenue, a 68.4% y-y increment.
Fig 1: Results summary 1Q13 1Q12 Y-O-Y % FY12 FY11 Income (restat Statement ed)
(S$ 'mn)

Aug-12

May-12

Nov-12

Feb-13

May-13

Y-Y

Volu me , mn

HOBEE SP EQUITY

STI rebased

Major Shareholders 1. Ho Bee Holdings Pte Ltd 2. Ho Bee Investment Ltd 3. Dimensional Fund Advisors LP Key Financial Sum m ary FYE Revenue (SGD mn) Net Profit, adj. (SGD mn) EPS, adj. (SGD) P/E (X),adj. BVPS (SGD) P/B (X) DPS (SGD) Div. Yield (%) Source: Bloomberg, PSR est. *All multiples & yields based on current market price Valuation Method RNAV Analyst Phillip Research Team research@phillip.com.sg +65 6531 1229

(%) 70.9 3.9 1.1

Revenue Gross profit Associates JV entities PBT PATMI

60.8 15.9 -0.2 5.2 67.9 52.1

36.1 10.1 -0.1 3.3 16.1 15.8

68.4% 58.3% N.M. 59.3% 321.0% 230.5%

461.6 151.7 -0.5 29.5 206.8 187.1

331.2 39.4% 118.8 27.6% 0.7 N.M. 44.9 -34.4% 224.2 -7.8% 202.5 -7.6%

12/11 342 168 0.23 9.2 2.37 0.9 0.04 1.9%

12/12 462 172 0.25 8.6 2.58 0.8 0.05 2.3%

12/13F 147 109 0.16 13.3 3.42 0.6 0.04 1.9%

12/14F 181 148 0.22 9.8 3.74 0.6 0.04 1.9%

Source: Company

How do we view this? Overall, results were largely in-line with our expectations. Although 3M13 revenue formed 41% of FY13 estimates, we do not foresee strong luxury residential sales amidst a challenging year ahead. While 3M13 PATMI accounts for a mere 9% of FY13 estimates, the strong pre-commitment level of The Metropolis prompts greater optimism. We expect strong reval gain upon its completion in 2H13 to bridge the gap. Additionally, the revaluation would boost its NAV and provide stronger recurring income. Investment Actions? We revised the valuation for The Metropolis and factored in gains from the divestments and reduced number of shares. RNAV is increased to $4.11, lifting fair value to $2.52, from $2.29 previously. Maintain Buy.

MCI (P) 194/11/2012 Ref. No.: SG2013_0083

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013 Challenging outlook for local residential sales In 1Q13, revenue from property development rose 75% y-y to S$58.1mn, owing to the revenue recognition for prior quarter unit sales of Trilight and One Pemimpin. Presently, Ho Bee have majority of their unsold inventory concentrated in Sentosa. With the cooling measures instilled, demand for new units at Sentosa has tapered off. With its strong balance sheet, Ho Bee should hold out and wait for opportune sales timing for its unsold residential units. Hence, we expect weaker local residential sales for FY2013.
Fig 2: Sentosa Projects
Projects (Singapore) Turquoise (Sentosa Cove) Seascape (Sentosa Cove) The Pinnacle Collection Source: Company, PSR estimates *as of 31-Dec-2012 Total Units 91 151 302 % Sold To Date 47% 28% Not launched

indicated a plausible S$80mn annual recurrent income when the development is fully leased in 2015. We are expecting a revaluation gain of about S$500 mil.
Fig 5: Reported revenue is 41% of our FY13 estimate
700 600 500 400 300 200 100 0 S$'mn FY10 FY11
Reported revenue

FY12

FY13E

FY14E

PSR estimates

Source: Company, PSR estimates Fig 6: Reported PATMI is 9% of our FY12 estimate
600 500 400 300 200 100 0

Fig 3: Transaction sales at Sentosa Cove

80 70 60 50 40 30 20 10 0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 FY08 FY09 FY10 FY11 FY12 '13

FY10 S$'mn

FY11
Reported net profit

FY12

FY13E
PSR estimates

FY14E

Sentosa - No. of Condo Units Transacted

Source: Company, PSR estimates

Fig 4: Lower net gearing

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 FY08 FY09
FY08 FY09

FY10
FY10 FY11

FY11
FY12

FY12

Maintain Buy with fair value increased to $2.52 Revising the valuation of The Metropolis and factoring in the divestment gains, we increased RNAV from $3.82 to $4.11. We maintain the discount to RNAV at 40%. Consequently, Fair value has increased from $2.29 to $2.47. We maintain our recommendation to Buy. We expect the completion of The Metropolis to boost its NAV and recurring income upon completion. Net gearing ratio decreased to 0.17x, as of Mar 2013, providing greater financing flexibility for future development capex.
Ho Bee Investm ent RNAV Surplus from investment properties (S$ m) Gain from divestment of investment properties NPV surplus of development properties (S$ m) Book value in FY2012 (S$ m) RNAV (S$ m) Total shares issued (m) RNAV per share (S$) Discount (%) Fair value (S$)

Overseas ventures residential With management foresight that 2013 will be a challenging year for the local scene, Ho Bee has actively strengthened its balance sheet to seek overseas opportunities. It has divested non-core investments and lowered its net gearing while actively acquiring overseas land sites in China and Australia. Among the overseas projects, we expect Ho Bee to partially launch its Tangshan Nanhu Eco-City (40% stake) in the 2H13. Revaluation gain expected in 2H13 The Metropolis is expected to complete by end 3Q2013. It is currently about 60% pre-committed, averaging rental of S$67psf for office and S$8-15psf for retail. Management has

522.1 91.3 446.8 1786.7 2846.8 677.7 4.20 40% 2.52

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013

FYE Dec Valuation Ratios P/E (X), adj. P/B (X) EV/EBITDA (X), adj. Dividend Yield (%) Per share data (SGD) EPS, reported EPS, adj. DPS BVPS Grow th & Margins (%) Grow th Revenue EBITDA EBIT Net Income, adj. Margins EBITDA margin EBIT margin Net Profit Margin Key Ratios ROE (%) ROA (%) Net Debt/(Cash) Net Gearing (X) Incom e Statem ent (SGD m n) Revenue EBITDA Depreciation & Amortisation EBIT Net Finance (Expense)/Income Other items Associates & JVs Profit Before Tax Taxation Profit After Tax Non-controlling Interest Net Incom e, reported Net Incom e, adj. ^Restated Source: PSR FY10 5.7 1.1 5.0 1.9% 0.45 0.38 0.04 2.00 FY11 9.2 0.9 9.5 1.9% 0.28 0.23 0.04 2.37 FY12 8.6 0.8 9.7 2.3% 0.27 0.25 0.05 2.58 FY13F 13.8 0.6 2.7 1.9% 0.80 0.16 0.04 3.42 FY14F 10.2 0.6 13.7 1.9% 0.21 0.21 0.04 3.59

-48.2% -29.7% -29.8% -17.6% 59.0% 58.7% 57.3%

-43.1% -47.1% -47.5% -39.4% 54.8% 54.2% 59.7%

35.2% -2.2% -2.1% 2.5% 39.7% 39.3% 39.7%

-68.2% 260.9% 264.3% -36.6% 450.1% 449.9% 385.4%

22.9% -80.4% -80.5% 35.5% 71.7% 71.5% 86.3%

24.9% 15.6% 675 0.45

13.0% 8.6% 452 0.27

10.9% 7.9% 304 0.17

27.5% 20.5% (49) Net Cash

6.2% 4.7% (46) Net Cash

600 354 2 353 (2) 0 52 402 (58) 344 11 333 278

342 187 2 185 (3) 0 46 228 (24) 204 1 203 168

462 183 2 181 (4) 0 29 207 (24) 183 (0) 187 172

147 661 0 661 (6) 0 27 682 (116) 566 2 564 109

181 129 0 129 (6) 0 65 188 (32) 156 8 148 148

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013

FYE Dec Balance Sheet (SGD m n) PPE Intangibles Associates & JVs Investment/Development Property Others Total non-current assets Inventories Accounts Receivables Investment property/Property held for sale Cash Others Total current assets Total Assets Short term loans Accounts Payables Others Total current liabilities Long term loans Others Total non-current liabilities Non-controlling interest Shareholder Equity Cashflow Statem ents (SGD m n) CFO Profit for the period Adjustments Cash from ops before WC changes WC changes Cash generated from ops Taxes paid, net Interest paid Cashflow from ops CFI CAPEX, net Dividends from associates & JVs Dividends/Interest from Investments Purchase/sale of investments Investments in subs & associates Others Cashflow from investm ents CFF Share issuance Purchase of treasury shares Loans, net of repayments Dividends to minority interests Dividends to shareholders & capital reduction Others Cashflow from financing Net change in cash Effects of exchange rates CCE, end ^Restated Source: PSR FY10^ 102 0 297 637 614 1,650 0 49 646 75 6 777 2,426 142 73 69 284 609 34 642 23 1,476 FY11 113 0 380 649 581 1,722 0 51 418 57 58 585 2,307 118 45 47 210 391 41 432 21 1,645 FY12 17 0 419 761 606 1,802 0 8 287 158 186 639 2,441 186 82 47 315 276 44 319 20 1,787 FY13F 16 0 446 873 606 1,941 0 12 337 590 186 1,125 3,065 2 50 47 99 540 91 631 20 2,316 FY14F 16 0 511 1,031 606 2,163 0 15 235 671 186 1,106 3,270 47 49 47 143 578 91 669 22 2,436

344 (95) 249 186 435 (114) 0 321 (427) 1 3 182 (488) 0 (729) 0 0 345 (10) (22) (0) 312 (96) (0) 75

204 (95) 109 158 267 (51) 0 216 (49) 26 4 157 (55) 0 84 0 (43) (248) (4) (22) 0 (317) (18) 0 57

187 (43) 144 183 327 (20) 0 307 (123) 32 3 46 (65) 0 (107) 0 (17) (49) (1) (28) 0 (95) 105 0 163

566 (516) 50 (86) (36) (68) 0 (104) (0) 0 5 462 33 0 500 0 0 74 (2) (35) 0 37 432 (5) 590

156 (32) 124 99 223 (32) 0 191 (112) 0 5 0 0 0 (106) 0 0 77 (6) (28) 0 43 127 (46) 671

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013

Ratings History 2.6 2.4 2.2 2 1.8 1.6 1.4 1.2 1 0.8
Market Price Target Price

Source: Bloomberg, PSR

Dec-09
1 2 3 4 5

PSR Rating System Total Returns Recom m endation Rating > +20% Buy 1 +5% to +20% Accumulate 2 -5% to +5% Neutral 3 -5% to -20% Reduce 4 <-20% Sell 5 Rem arks We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market sentiment, recent rate of share price appreciation, presence or absence o

Mar-10

Jun-10

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Dec-10

Mar-11

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Sep-11

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013 Important Information This publication is prepared by Phillip Securities Research Pte Ltd., 250 North Bridge Road, #06-00, Raffles City Tower, Singapore 179101 (Registration Number: 198803136N), which is regulated by the Monetary Authority of Singapore (Phillip Securities Research). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below. This publication has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this document by mistake, please delete or destroy it, and notify the sender immediately. Phillip Securities Research shall not be liable for any direct or consequential loss arising from any use of material contained in this publication. 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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013 Contact Information (Singapore Research Team)

Chan Wai Chee CEO, Research Special Opportunities +65 6531 1231 yebo@phillip.com.sg Go Choon Koay, Bryan Investment Analyst Property +65 6531 1792 gock@phillip.com.sg Roy Chen Macro Analyst Global Macro, Asset Strategy +65 6531 1535 roychencz@phillip.com.sg

Joshua Tan Head of Research Global Macro, Asset Strategy +65 6531 1249 joshuatan@phillip.com.sg Ken Ang Investment Analyst Financials, Telecoms +65 6531 1793 kenangwy@phillip.com.sg Nicholas Ong Investment Analyst Commodities, Offshore & Marine +65 6531 5440 nicholasonghg@phillip.com.sg

Derrick Heng Deputy Head of Research SG Equity Strategist & Transport +65 6531 1221 derrickhengch@phillip.com.sg Ng Weiwen Macro Analyst Global Macro, Asset Strategy +65 6531 1735 ngww@phillip.com.sg Research Assistant General Enquiries +65 6531 1240 (Phone) research@phillip.com.sg

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Ho Bee Investment Ltd Singapore Equities Research 3 May 2013 Contact Information (Regional Member Companies)

SINGAPORE Phillip Securities Pte Ltd Raffles City Tower 250, North Bridge Road #06-00 Singapore 179101 Tel +65 6533 6001 Fax +65 6535 6631 Website: www.poems.com.sg HONG KONG Phillip Securities (HK) Ltd Exchange Participant of the Stock Exchange of Hong Kong 11/F United Centre 95 Queensway Hong Kong Tel +852 2277 6600 Fax +852 2868 5307 Websites: www.phillip.com.hk INDONESIA PT Phillip Securities Indonesia ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A Jakarta 10220 Indonesia Tel +62-21 5790 0800 Fax +62-21 5790 0809 Website: www.phillip.co.id THAILAND Phillip Securities (Thailand) Public Co. Ltd 15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand Tel +66-2 6351700 / 22680999 Fax +66-2 22680921 Website www.phillip.co.th UNITED KINGDOM King & Shaxson Capital Limited 6th Floor, Candlewick House, 120 Cannon Street, London, EC4N 6AS Tel +44-20 7426 5950 Fax +44-20 7626 1757 Website: www.kingandshaxson.com AUSTRALIA PhillipCapital Level 12, 15 William Street, Melbourne, Victoria 3000, Australia Tel +61-03 9629 8288 Fax +61-03 9629 8882 Website: www.phillipcapital.com.au

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