by ishak » Fri Aug 15, 2008 7:13 pm
HOLD S$1.45 STI : 2,816.66
(Upgrade from Fully Valued)
Price Target: 12-month S$ 1.59 (Prev S$ 1.88)
Reason for Report : 2Q08 Results
Potential Catalyst: Acquisition of more landbank
Limited downside
Story: Wheelock reported 2Q08 revenue of S$87.9m with net profit at S$15.3m. Like the previous quarter, revenue came from recognition of its sold out projects The Sea View (obtained TOP in the quarter), The Cosmopolitan (obtaining TOP in 3Q08) and Ardmore II; as well as rental from Wheelock Place. Wheelock also booked a S$90m revaluation gain for Wheelock Place, but took a S$85.4m impairment loss on investments in its P&L as a result of paper losses for its stake in SC Global. Wheelock changed its financial year end from 31 March to 31 December earlier this year, so no comparable figures are available.
Point: Wheelock will not launch Orchard View (30 units) or Ardmore III (84 units) this year – these are its only remaining landbank. It only has Scotts Square to offer, where only 6 additional units were sold in 2Q08. However, it commanded a healthy ASP of c. S$4,100psf according to URA data, which demonstrates that it is willing to pace out sales while maintaining ASPs, given its healthy balance sheet. Its net cash position rose S$119.9m in 1Q08 to S$255.4m in 2Q08 (or 21 cents per share), while book NAV per share rose q-o-q to S$1.72 from S$1.70.
Relevance: We are not optimistic of any re-rating catalyst for Wheelock, and the stock is likely to trade range-bound. We maintained a Fully Valued call for Wheelock following its 1Q08 results and the share price has since fallen 35%, underperforming both the STI Index (-12%) and the FSTRE Index (-23%). At the current price, however, Wheelock is trading at 16% below its book NAV, and coupled with earnings visibility from units sold at Ardmore II and Scotts Square, we believe downside is now limited. Hence, we upgrade Wheelock to HOLD with a lower target price of S$1.59 (previously S$1.88), based on 30% discount to its RNAV of S$2.27 (previously S$2.68).
Bought some @ 1.29
You have to learn the rules of the game. And then you have to play better than anyone else.
- Albert Einstein