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SI RESEARCH: WHEELOCK PROPERTIES (SINGAPORE) – DEVELOPER WITH DEEP POCKETby Don Low
June 27, 2017 S
About Wheelock
Wheelock is a primarily a property investor and developer with focus on luxury residences. Amongst its ongoing residential development projects in Singapore are
Scotts Square Residences, Ardmore Three and The Panorama. In addition, the company has one residential development project in China’s
Fuyang district comprising villas, townhouses and duplexes on a site area of 3.2 million square feet.
Apart from residential development, the company also owns two commercial properties,
Wheelock Place and Scotts Square in the bustling district of Orchard Road, under its investment portfolio.
Deep Pocket
In its latest financial 1Q17 result, Wheelock has a cash balance of $530.6 million and zero debt. This gives Wheelock a net cash position of $0.443 per share or 23.6 percent of the current share price of $1.88.
Meanwhile, investment properties and development properties amounted to a value of $1.9 billion or about $1.57 per share. In other words, after accounting for the cash portion, investors are effectively getting an 8.5 percent discount for Wheelock’s properties alone!
Conversely, Wheelock’s total liabilities only amounted to $203.6 million while current assets itself amounts to $1.3 billion. Reasonably, barring that the company seeks out acquisitions or land-banking opportunities, we can expect that Wheelock’s cash assets would increase to over $1 billion in next few quarters as it continues to book in sale proceeds.
In addition, Wheelock already recorded a
fair value loss on both Wheelock Place and Scotts Square by a total of $54.3 million in 4Q16. Given that, we can assume that a turnaround in the property market may help lift Wheelock’s investment properties value for FY17 and hence give investors deeper value at the current share price.
Privatisation Candidate
As a whole, Wheelock has a massive net asset value of $3 billion ($2.52 per share). Against the current share price of $1.88, Wheelock is thus changing hands at 0.75 times price-to-book (P/B) or at a
25 percent discount.With the steep discount of its shares, getting economically viable funding options from the equity market might be a challenge for Wheelock. This is in addition to the fact that the company has to incur costs for listing on the Singapore Exchange. Given that the company’s land-banking activities also have been somewhat muted, there may be possibility that there is intention for Wheelock to be privatised.
Wheelock and Company, the parent of Wheelock, owns about
76 percent of the company. Assuming the parent offers a 15 percent premium to the current share price, it would only require slightly over $620 million to take Wheelock private. In doing so, the parent will be able to gain excess to its
ballooning cash pile that potentially could be over $1 billion.Valuation
Even if a privatisation of Wheelock does not materialise to unlock shareholder value for investors, Wheelock’s consistent yearly dividend per share of $0.06 still offers an attractive 3.2 percent yield on the current discounted share price.
Source: Shares Investment
http://aspire.sharesinv.com/48478/si-re ... ep-pocket/
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