Published July 5, 2007

Heeton expects bonanza from prime project


PROPERTY group Heeton Holdings could recoup its entire initial investment in its exclusive The Lumos condo by selling just two penthouses and a few mid-sized units during this weekend's pre-invitation launch.

The Lumos: Market watchers reckon units at the Leonie Hill condo could fetch well over $3,000 psf

The company is confident that over a third of the 53 units at the prime Leonie Hill site will be snapped up at this Saturday's 'by-invitation-only' event for special guests.

'We have not issued any price list,' said Danny Low Yee Khim, the Sesdaq-listed company's executive director and chief financial controller. 'But I expect property agents will have indicative prices benchmarked against neighbouring properties in the vicinity. Some are apparently coming with blank cheques from their invited clients.'

Key among these 'neighbouring properties' is SC Global's Marq On Paterson Hill, which set a new record last week when a unit was sold for $5,100 per square foot (psf). And all 21 apartments in the first phase of that 66-unit luxury development - just down the road from Lumos - have been taken up at an average selling price of $4,137 psf.

Market watchers reckon units at The Lumos could fetch well over $3,000 psf. At this price, Heeton and Koh Bros (each has a 50 per cent stake in the project) stand to make some $220 million - or $110 million each - in profit.

This works out to about 50 cents per share for Heeton, and 24 cents per share for Koh Brothers.

The two firms bought the site - previously Hilton Towers - in April 2006 for $79.2 million, or about $880 psf per plot ratio, including a development charge of about $3.9 million. Coupled with construction cost, the total cost is said to be well under $1,200 psf.

Mr Low reckons the company will recover most of its land cost by selling its two penthouses, which, together, have a floor area of almost 12,000 sq ft.

'If they go at $4,000 psf, we are looking at almost $50 million, which more than covers our 20 per cent loan on land cost,' he said. 'All we need is to sell a few more units and we're home free.'

Mr Low describes Heeton's move into property development as a necessary move for a company which previously sustained itself largely on rental incomes of its market stalls around the island. 'The 198 wet market stalls delivered steady yields of about 16 per cent in good times and bad,' he said. 'But we, as a company, came to a stage where we needed a quantum leap. And the logical choice was property development.'

Its investment properties include the Sun Plaza in Sembawang which it jointly owns with Koh Bros, Woodgrove in Woodlands, and Tampines Mart.

Then there is its 13-floor 39-unit freehold building at Kee Seng Street, within the financial district. It is estimated to be worth about $80 million in its current state. Mr Low said that Heeton would be looking into redevelopment plans for this property, which has a plot ratio of 3.9.

Meanwhile, the company is selling the last seven units in its 17-unit The Elements@Stevens project at Stevens Road - a project which could yield some $13 million in profit.

Last month, it joined hands with Koh Brothers, KSH Holdings and Lian Beng Group to buy the freehold Lincoln Lodge for $243 million. The consortium wants to buy a 3,358 sq ft plot of adjoining state land for about $3 million.

Mr Low said that the next phase would also include high end developments in Kuala Lumpur and Bangkok. 'Ultimately, Singapore will account for 75 per cent of contribution, with offshore operations accounting for the rest.'

All this is heady stuff for a low profile company with earnings of just $4.5 million in FY2006, and $3.9 million in 2005. Some analysts estimate the RNAV of Heeton to be $1.40, based on current projects and surplus from prospective revaluation of its investment properties such as Sun Plaza.