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Published December 22, 2010
Tuan Sing an undervalued property play?
By VEN SREENIVASAN
TUAN Sing Holdings, a relatively low-profile diversified property group controlled by the Liem family, seems to be stirring of late.
The group, which owns prime commercial property assets in the heart of the city and two 5-star hotels in Australia, among various properties, recently hit the headlines after it clinched two residential property sites for some $222 million.
It secured a 1.7 hectare 99-year leasehold site on Seletar Road for some $123 million. And it also successfully tendered for Serene House, opposite the upcoming Botanic Gardens MRT Station, for $99.1 million.
Tuan Sing is not widely followed by analysts. But given its growth and earnings potential in the property space, perhaps the market should be watching this company more closely.
The group, whose Botanika project established it as a notable player in the high-end boutique residential property market, seems to be looking to capitalise on this niche through its two recent property acquisitions.
Serene House has a freehold land area of 39,828 square feet and sits in a prime suburban location on Cluny Park Road. The site is zoned for residential use with a 1.4 plot ratio. Assuming the site can be amalgamated with the driveway, the total site area can be potentially enlarged to about 49,021 sq ft - enough for a four-storey condo with 68 units averaging 1,000 sq ft. Analysts estimate the project could break even at about $2,000-2,100 per square foot.
But units at nearby Nassim Park Residences have sold at an average price of $3,659 psf in the second half of this year.
Exciting the market
Over at Seletar, based on an average price of $1,300 psf for The Greenwich project next door, Tuan Sing's profit margin could be in the region of 30 per cent.
Besides these two projects, it is developing a high-end boutique cluster housing at its Mont Timah site.
But what could really excite the market about Tuan Sing are its plans for its portfolio of prime commercial properties right in the heart of Singapore's financial district.
This is a cluster of three properties, comprising the ageing 13-storey Robinson Towers on Robinson Road, its adjacent Annex building, and the 13-storey International Factors Building. Together, they have a total built-up plot ratio of 10 times, comprising a total floor area of some 12,500 square metres, or some 134,000 sq ft.
Tuan Sing's valuation of these properties, done last year, was $206 million.
Market watchers believe these properties are significantly undervalued. For example, Robinson Towers is valued at about $1,500 psf, compared to $2,600 psf average fetched by neighbouring Finlayson.
Meanwhile, the Urban Redevelopment Authority (URA) is reviewing the land use zoning of sites in the central business district to ensure a steady supply of office space. Given that Tuan Sing's properties sit close to the fast developing and rejuvenated Marina Bay area - where projects like One Raffles Quay, Marina Bay Financial Centre and The Sail sit - it's not a question of whether redevelopment will happen, but when.
Strong balance sheet
And any such move - whether to build spanking new office towers or residential apartments - will be a catalyst for a significant re-rating of the company and its stock (which incidentally trades at a significant discount to its NTA per share of 45 cents).
Indeed, the handful of analysts who occasionally do glance at the company note the strength of its portfolio and balance sheet.
Kim Eng recently pointed out that after stripping out the market value of its stakes in industrial companies SP Corp and Gul Tech, the implied market value of Tuan Sing's Singapore office portfolio and 50 per cent stakes in its two 5-star hotels in Melbourne and Perth, respectively, works out to only $180 million - significantly below their fair value.
The company, which sold its stake in Katong Mall for $248 million earlier this year and its Adelaide hotel for $75 million last year, has $204 million in cash balances. And it posted a net profit of $45 million last year, and $31 million for the first nine months of this year.
Given its solid property portfolio, strong balance sheet and potential earnings inflow, Tuan Sing is a company which is worth a serious look for investors seeking out undervalued property plays heading into the new year.
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