"Outter" -- formerly an equity analyst in a bank -- contributed this article to NextInsight as a follow-up to his article 

SING HOLDINGS: Parc Botannia Preview - Strong Pricing Reflects Developer’s Confidence

Higher RNAV & fair value: We attended Sing Holdings' Limited (SHL) condominium project, Parc Botannia, VIP Preview at the Fernvale Road showflat over the weekend. The average selling price (ASP) was 10% higher than our earlier estimate at around $1,265 psf.

Click to watch our short video of the crowd at the preview -->

   


In our view, SHL has positioned the Parc Botannia project to capitalize on the positive sentiment in property sector. 

The strong pricing reflects the developer’s confidence in the project and the Singapore residential property market. We raise our present value estimate for Parc Botannia to reflect the higher ASP and lift SHL’s RNAV to $0.98, and fair value to S0.78 accordingly.

Additionally, we see upside to our RNAV/fair value forecast as the next catalyst unfolds on 11 Nov 2017, the official launch date of Parc Botannia.

Higher RNAV on Better ASP in Parc Botannia

Book value

RNAV

Comments

Investment property-Travelodge

120

120

 

Development properties-
Parc Botannia

315

431

ASP $1,265 psf

Completed properties

     

-Biz Tech

26

46

marked to mkt 950 psf

-Robin Residence

52

48

fully sold with $4mn loss

Others

24

24

 

Cash

60

60

 

Total assets

597

729

 

     

Bank loans

291

291

 

Others

46

46

 

Total Liabilities

337

337

 

Shareholders' Equity

260

   

     

RNAV

 

392

 

     

No of shares (mn)

401

401

 

RNAV Per share-S$

0.65

0.98

 

Stock price

0.50

0.50

 

Discount

23%

49%

 

 

Parc Botannia Present Value Estimates

Total land costs -$mn

287

Saleable area-sq ft

560,000

Price psf ppr-$

517

Development costs-$/psf ppr

280

ASP-S$ psf

1,265

Development margin-$/psf

468

Development margin-%

37%

Total development profit-$mn

262

Less expense & taxes-$mn

52

Net profit-$mn

210

SHL share @ 70% - $mn

147

Present value - $mn

116

No of shares-mn

401

Present value per share-$

0.29

Source: Company data, Discount rate: 10%

 

Higher-than-expected ASP: Based on the early bird price guide for the preview, a unit in Parc Bontannia starts from $548,000 for the smallest 1-bedroom unit (Type 1BR).  The largest 5-bedroom (Type 5BR) unit starts at $1.6mn. 

LeeSzeHao portraitLee Sze Hao, CEO of Sing Holdings, with a portrait of his father, Lee Fee Huang, the founder of the company.
NextInsight file photo
Based on our calculation, the gross development value (GDV) of Parc Botannia could reach roughly $670mn, under the minimum pricing scenario, and imply an ASP of approximately $1,196 psf. 

As all of us know, the starting price is usually reserved for units on the lowest floor. Assuming an additional $5,000-8,000 per unit as we move up each floor, the maximum price for the 1BR unit could reach $653,000-716,000. 

In this scenario, the GDV could reach $747mn, 16% higher than our previous forecast of $644mn.  A more realistic case would be the midpoint, with GDV at around $708mn, 10% above our estimate, which translates into an ASP of $1,265 psf.

Unit Pricing and GDV Computation

   

 

Price per unit-$

 Gross Development Value -$ mn

Type

Size-sq ft

No. of units

Min

Average

Max

Min

Average

Max

1BR

430

67

548,000

600,500

653,000

36.7

40.2

43.8

1+S

506

126

633,300

685,800

738,300

79.8

86.4

93.0

2BR-C

581

83

738,000

790,500

843,000

61.3

65.6

70.0

2BR-P

667

123

820,000

872,500

925,000

100.9

107.3

113.8

2+S

775

63

937,000

989,500

1,042,000

59.0

62.3

65.6

3BR-C

870

84

1,040,000

1,092,500

1,145,000

87.4

91.8

96.2

3BR-P

969

105

1,170,000

1,222,500

1,275,000

122.9

128.4

133.9

4BR-C

1152

21

1,300,000

1,352,500

1,405,000

27.3

28.4

29.5

4BR-P

1280

42

1,450,000

1,502,500

1,555,000

60.9

63.1

65.3

5BR

1453

21

1,600,000

1,652,500

1,705,000

33.6

34.7

35.8

Total

 

735

     

670

708

747

Implied ASP-$/psf

       

1,196

1,265

1,334

Size refers to the minimum for each unit type. We calculated the maximum price and GDV assuming the minimum size for each unit.
Source: Company data

Unit PSF were mostly higher than our estimates

 

Price per sq foot- $/psf

Type

Min

Average

Max

1BR

1274

1397

1519

1+S

1252

1355

1459

2BR-C

1270

1361

1451

2BR-P

1229

1308

1387

2+S

1209

1277

1345

3BR-C

1195

1256

1316

3BR-P

1207

1262

1316

4BR-C

1128

1174

1220

4BR-P

1133

1174

1215

5BR

1101

1137

1173

We calculated the price per square foot assuming the minimum size for each unit.
Source: Company data

 
Raising forecast and fair value: We incorporate the higher ASP of $1,265 psf, derived from the midpoint GDV scenario, into our Parc Botannia model.  Accordingly, we raise our present value estimate on Parc Botannia to $0.29/sh from $0.22/sh.

Key changes

New

Old

%

ASP-$/psf

1,265

1,150

10%

Parc Botannia PV-$/sh

0.29

0.22

32%

RNAV-$/sh

0.98

0.91

8%

Fair Value-$/sh

0.73

0.65

12%

Additionally, we lift SHL’s sum-of-the-parts valuation to $0.98/sh from $0.91 and fair value to $0.73/sh. from $0.65/sh. 


Priced to capitalizing on the rising market:
Prices and units types are set to capture the targeted buyers. For example, the starting price for small size units, 1 and 2 bedroom, are kept below $1mn, to make them attractive to investors.  The larger size 3 bedroom units are priced below $1.2mn, to make them affordable to young couples and family, looking to buy a private property. 

The 4 and 5 bedroom units are aimed at established families looking for more space and comfort. Finally, the units are fitted with branded appliances and fine finishes which offer value to the buyers. 


A sellers’ market: While there were no sales, the well-attended preview suggest strong interest for the project.  According to property agents, the units will be balloted on the launch date, 11 Nov.  Potential buyers need to register their interest by handing over a cheque to their agents.  

This arrangement reflects a sellers’ market, in our view. We estimate that every $100 psf increase in ASP could raise SHL share of the net profit by $45mn and its fair value by roughly $0.05 per share.  Upside risk could come from more aggressive pricing by the developer to maximize the sale.

About the event: The preview was well organized. Ushers showed visitors to the viewing areas and showflats.  Valet parking service was provided.  The sales gallery was fully occupied during our visit.  Property agents from Huttons were patient and took the time to explain the positive attributes of Parc Botannia, such as the location, accessibility and facilities. An agent also highlighted to us the potential developments in the vicinity, such as educational institutions and emerging industries in the Seletar Regional Centre, which would enhance the future value of Parc Botannia.  

 

Risks: Lower housing demand leading to weaker sales.

Disclaimer: This report is strictly for information purpose only. It does not contain any investment, financial, tax, legal or insurance advice; you should always seek such advice from professionals who are qualified, licensed and regulated in the respective relevant field. Do your own due diligence before undertaking any investment.

Watch this fly-through video of Parc Botannia -->


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