DBS report puts spotlight on Bukit Sembawang

Despite a drop in third quarter earnings to $5.4 million, Bukit Sembawang saw its shares rise 7.84 percent to close at $5.23 on Thursday, media reports said. In fact, over 808,000 shares changed hands...

About 75 percent of Bukit Sembawang’s 2.8 million sq ft landbank in Singapore is still undeveloped.

Despite a drop in third quarter earnings to $5.4 million, Bukit Sembawang saw its shares rise 7.84 percent to close at $5.23 on Thursday, reported the Straits Times.

In fact, over 808,000 shares changed hands, or almost nine times the average daily trading volume of the developer since February 2016.

This comes after a DBS Bank report dubbed the low-profile property developer the “Landlord King”.

DBS analysts Rachel Tan and Derek Tan noted that the rubber firm turned property developer owns one of the biggest tracts of freehold land, which formerly were rubber plantations.

Of its over 2.8 million sq ft landbank, 75 percent are still undeveloped and zoned for landed properties, primarily in Sembawang, Seletar and Ang Mo Kio.

Given the limited land supply in Singapore, this makes Bukit Sembawang an attractive takeover target.

The developer’s major shareholder, OCBC Bank’s Lee family (44 percent stake), may be in the mood for “divestment”, considering their history of similar moves, notably Asia Pacific Breweries and Fraser & Neave.

Mr Tan attributed the hike in stock price to market talk of potential mergers in the developer arena, for companies like United Engineers.

Alan Cheong, Research Head at Savills Singapore, recently observed a re-rating of property stocks in the stock prices of Wing Tai, Far East Orchard and Wheelock Properties.

According to him, the market appetite may have been “kick-started” by the analyst report.

“People are sick of listening to the bearish storylines of property. They are finding resilience in property prices,” said Cheong, who believes property prices have bottomed out.

Bukit Sembawang’s downside, however, is the possibility that it could pay qualifying certificate penalties on account of its two projects – Paterson Collection and St Thomas Walk – should they remain unsold by Q3 2017 and 2019 respectively.

Nonetheless, “a bulk sale of the projects could mitigate that risk”, the analysts wrote.

 

Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg