PhillipCapital analyst Yik Ban Chong has initiated a “buy” call on Wee Hur Holdings with a target price of 62 cents.
The investment holding company was listed on the Mainboard in 2008. Its operating segments include building construction, workers’ dormitory, property development, fund management and purpose-built student accommodation (PBSA) operations. Building construction was the largest contributor to Wee Hur’s revenue in the 1HFY2024 ended June 30 at 41% followed by workers’ dormitory, which contributed 39%.
To Yik, Wee Hur’s worker’s dormitory segment remains a “key growth driver” with higher rental rates in FY2024 and a higher bed capacity expected to materialise by the end of FY2025. The group’s second purpose-built dormitory (PBD), Pioneer Lodge, is its second one with 10,500 beds. It is expected to be partly operational by 1Q2025 and fully operational by the end of this year.
“We expect revenue and patmi for the workers’ dormitory segment to increase by [around] 40% CAGR (or compound annual growth rate) from FY2023 to FY2025,” says Yik. “There is upside to our target price if the remaining two-year lease of the 15,744-bed Tuas View Dormitory is extended.”
Wee Hur, which recently secured an A$1.6 billion ($1.36 billion) exit from its PBSA portfolio, could net $320 million in proceeds and a one-off gain from sale of $36 million, Yik notes.
The move could also improve the group’s financial position, bringing it to net cash of $259.3 million from its current net debt of $60.6 million.
“Given the group’s track record of declaring special dividends during strong financial performance, we believe there is a strong likelihood that special dividends may be announced,” he writes. “Notably, in FY2012, the Group reported around $90 million gain from sale from the completion of the Harvest@Woodlands industrial development project and subsequently distributed $15.9 million in special dividends.”
Following the sale of its PBSA portfolio, Wee Hur will see a 10.6% increase in its revised net tangible assets (NTA) to 73 cents from 66 cents. “Based on the average 0.9 times P/B of the group’s comparables, this represents a 56% upside in valuations based on current stock prices,” says Yik.
“Given the successful agreement to realize value from its PBSA portfolio, we believe the group is well-positioned to leverage its expertise and experience to maximize the potential of its remaining tangible assets,” he adds.
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At its closing price of 42 cent as at Yik’s report dated Jan 3, the stock is trading around 36% below its book value.
As at 2.31pm, shares in Wee Hur are trading 3 cents higher or 7.14% up at 45 cents.
