OCBC - fair value S$0.51
Lian Beng Group Ltd (LBG) announced that it has entered into a conditional contract (through its 50% owned JV company, Spottiswoode Development) for the collective purchase of the "Dragon Mansion" at Blk 14, Spottiswoode Park Road for S$130m. The residential site has land area of 38,618 sqft, with a plot ratio of 2.8 and can be built up to 36 storeys. The acquisition will be financed by internal funds and/or bank borrowings. This development venture will not have any material impacts on the group's earnings for the current financial year ending 31 May 2012. However, we will be speaking with management to get more insights into its plan for the site and will review our earnings estimates later. Meantime, we maintain our BUY rating and fair value estimate of S$0.51.
DMG - TP of S$0.71
The news: Together with Centurion Properties Pte Ltd, Lian Beng which has a 50% stake in the joint venture, is acquiring “Dragon Mansion” at Blk 14 Spottiswoode Park Road for S$130m. The land area is 38,618 sqf and has a gross plot ratio of 2.8, implying a potential gross floor area of 118,943 sqf (including 10% bonus gross floor area for balconies). Our thoughts: We estimate breakeven cost for this project to be ~S$1,500 psf. Assuming the current selling prices of property in the project’s vicinity continues to hold up at ~S$2,100 psf, this implies a potential profit of ~S$600 psf or ~S$36m for Lian Beng. With a strong order book of S$761m and demand for construction services to remain sustained, on the back of public infrastructure, public housing and private property projects being rolled out, we maintain our BUY recommendation on the stock and TP of S$0.71, based on 7x FY12 earnings.
AM Fraser
Lian Beng - Tie-up wins Dragon Mansion bid A Joint venture between Lian Beng Group and Centurion Properties has clinched the freehold Dragon Mansion through a collective sale for $130mil, which works out to $1,202 psf per plot ratio. No development charge is payable.
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