This is an excerpt from NRA Capital’s research report on TEE Land (SGX: 5WE).

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By Liu Jin Shu

In its latest 2Q18 results, NRA Capital noted that local-listed property developer TEE Land saw significant improvements to fundamentals, after substantially selling down its legacy projects.  According to NRA Capital Head of Research Liu Jinshu, older completed properties have weighed on TEE Land’s profitability, for instance, unsold units at The Peak@Cairnhill 1 caused the group to record impairment losses of $1.8 million in 2Q18. However, these properties have since been substantially sold, and TEE Land could potentially recover close to $30m of cash through 2018.

Mr Liu further highlighted that TEE Land’s recent launch 24 One Residences at Pasir Panjang have already been 100 percent sold, a sign that other new launches are also selling well. Overall, TEE Land is estimated to have $212 million of pre-sales to be recognised from 1 June 2017 onwards, of which $170 million were either from uncompleted or new projects. The remaining $42 million of pre-sales would be made up from completed projects. The estimated $212 million of pre-sales is expected to lift growth for FY18 and FY19.

Moreover, TEE Land has acquired two sites with an estimated total Gross Development Value of $195.5 million, expected to be launched later in 2018. The new projects would be relatively well-received as they are in exclusive neighbourhoods with few existing launches in the vicinity.

While TEE Land suffered an impairment loss from the sale of Chewathai, the group made a cash profit from the deal due to the low cash cost of its investment, in addition to the prior dividends received. Going forward, Mr Liu thinks that the group will probably aim to sell the Larmont Hotel in Sydney to further raise capital efficiency and the sale of these non-core assets may yield surprise gains.

Especially with its improved balance sheet and outlook, TEE Land can target smaller sites that large developers overlook. The announcement of new projects will be a catalyst its share price. In this update, NRA Capital remains OVERWEIGHT on TEE Land, ascribing a fair value of $0.280 to the stock. TEE Land is currently trading at about $0.185 per share.