For most of 2H17, Rowsley Holdings (Rowsley) has dominated daily trading volumes owing to the news of Singaporean business magnate Peter Lim’s plan to inject Thomson Medical into the group. Other developers attracted little investors’ interest, until enbloc activities started to heat up recently.

As always, investors tend to think of the usual suspects like City Developments and UOL Group when they want to pick up stocks to ride the recovery in Singapore’s property market. But that leaves some small and mid-cap developers undiscovered at discounted valuations. Here are 3 mid-cap developers that could see strong growth in 2018.

Sexy Roxy-Pacific Holdings

Overlooked for its size, Roxy-Pacific Holdings (Roxy) was one of the first movers to landbank when others were still unsure. Roxy started landbanking since 2H16 and the group has already acquired seven freehold plots of land for residential developments. Meanwhile, other developers are only rushing in to landbank at recent high land-bid prices.

Not only did Roxy manage to landbank at rock bottom prices, the group would also be amongst the few developers to launch projects early in the upcycle. According to DBS Group Research (DBS), of the group’s seven residential developments, three are expected to be launched within 1Q18. In total, DBS expects Roxy to deliver 476 residential units that could potentially generate more than $500 million in gross development value.

Apart from its local development projects, Roxy’s investments into Australia in 2015 would soon pay off. Of the five projects in Australia, four have been substantially sold by more than 95 percent; the remaining project Art House at West End Gate was launched in 3Q17. Units sold have a total sales value of about $300 million, which could potentially contribute to FY18 and FY19 earnings.

Aside from that, Roxy’s recurring income portfolio has also expanded to give investors more earnings stability. In FY17, Roxy added two commercial buildings in Australia and another two in New Zealand to its stable. As of now, Roxy has five investment properties and the collective size has grown three-folds to $330 million, further suggesting that contributions from investments properties could triple.

Overall, DBS is bullish on Roxy, giving it a “BUY” call and a target price (TP) of $0.69 based on 30 percent discount to its Revised Net Asset Value (RNAV). At $0.69, the TP represents about 26.6 percent upside from the current share price of $0.545.

Steamy Oxley Holdings

Just yesterday, Oxley Holdings (Oxley) exercised its options to purchase yet another site comprising all eight units of the Apartment 8 freehold development in the Potong Pasir neighbourhood at $21.5 million. Prior to that in November 2017, Oxley enbloced Mayfair Garden at $311 million. After adding both sites, Oxley continues to have the second largest residential landbank among listed property stocks in Singapore.

According to UOB-Kay Hian (UOBKH), Oxley’s management is fast-tracking its launches in Singapore, ahead of the heavy pipeline of launches from recent enbloc activities which may come after 2H18. Most of its existing Singapore’s projects are targeted to be launched by 1H18.

Analysts also see strong earnings visibility, as Oxley is backed by $2.3 billion in unbilled contracts. These comprise of projects mainly from UK, Cambodia and Indonesia and the overseas projects are selling well and contributions would be recognised progressively. In particular, Cambodia’s “The Bridge” project is nearly sold out and complete hand-over is targeted in January to February next year.

Despite making significant headways in various projects, UOBKH felt that the latest move Apartment 8 freehold development in the Potong Pasir neighbourhood may be too aggressive. The 898.1 square meter (9,667.1 square feet) site has an estimated breakeven cost of roughly $2,300 per square foot (psf). Comparatively, recent transactions of nearby projects were only in the range of $1,000 to $1,500 psf, suggesting that Oxley’s bid built in over 30 percent appreciation in residential prices in the area.

Nonetheless, $21.5 million is still but a relatively small amount compared to Oxley’s portfolio. Excluding Apartment 8 in Potong Pasir, UOBKH believes Oxley is still undervalued considering that it is trading at more than 20 percent discount to its RNAV of $0.93 per share. As such, pegging Oxley to 20 percent discount to RNAV, UOBKH maintains a “BUY” call but raise the target price to $0.74, representing a potential upside of 17.5 percent.

Attractive SingHaiyi Group

SingHaiyi Group (SingHaiyi) has been flying under the radar but that may not last any longer. The smallest in this list, SingHaiyi only has a market capitalisation of about $356 million, lower than its 1H18 revenue of $389.6 million. For 1H18, SingHaiyi delivered a net profit of $24.4 million on its revenue, about 32.6 percent higher than the previous year.

Typical of developers, revenue recognition can be chunky but SingHaiyi should not see revenue plunging down soon since there are two ongoing projects – City Suites and Vietnam Town in US. The two projects were only launched in 2H17. The Vales, launched in 1H17, was already 100 percent sold and should also continue to contribute as remaining sold units are delivered.

There is also a steady pipeline of projects that provide some earnings visibility as SingHaiyi started the development work for the new Grade A commercial building at 9 Penang Road which is expected to be completed in FY19. The development site sits at what used to be Park Mall, directly opposite of the prime retail mall Plaza Singapura. The site will be redeveloped into a commercial property comprising office space with total net lettable area (NLA) of 352,000 square feet and one level of retail space with a NLA of 15,000 square feet.

In addition, there is also ongoing redevelopment work for 5 Thomas Mellon Circle in US San Francisco whereby the existing office building would be transformed to a waterfront lifestyle residential property. There is also Phase Two of Vietnam Town – which saw a fast take up in Phase 1 – expected to be completed by end of 2017.

Notwithstanding all its upcoming launches, SingHaiyi has pared down its debt from the peak of $550.7 million in FY14 to $106.4 million in 1H18. The group still withholds cash of $105 million, after accounting for the successful tender of the collective (50:50) purchase of Sun Rosier at How Sun Drive. That means that SingHaiyi still has significant net debt headroom to pursue other landbanking opportunities.

Rounding up, Shares Investment also like SingHaiyi because we think the group is still “cheap”. Based on its current trading price of $0.121, SingHaiyi is valued at only 0.7 times its book value and just seven times to its trailing 12-months earnings.


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