CGS-CIMB stays positive on Guocoland after Pacific Mansion en bloc deal

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Guocoland’s deal to buy Pacific Mansion for S$980 million, the second-largest collective sale in Singapore’s history, will replenish the developer’s landbank and add to its value, CGS-CIMB said in a note on Monday.

“This transaction would enable Guocoland to replenish its dwindling Singapore residential sale pipeline,” the brokerage said. The deal also “underlines the developer’s confidence and optimism on the Singapore private residential market outlook. In addition, it would extend Guocoland’s residential development income visibility.”

The bid translates to a land price of S$1,806 per square foot of gross floor area, with a potential break-even cost around S$2,500 per square foot, the note said. At an average selling price of S$2,700psf, the project could add 4 Singapore cents to Guocoland’s current RNAV (revalued net asset value) of S$3.84, the brokerage said.

It follows the successful launch of nearby project Martin Modern, CGS-CIMB said.

‘Attractive valuations’

But the brokerage doesn’t expect the project to be launch ready until at least 2019.

Guocoland will take 40 percent of the project, while Intrepid Investments takes another 40 percent and Hong Realty the remainder, the brokerage noted.

“We continue to like Guocoland for its attractive valuations and high recurrent income base,” the note said. “The stock is trading at a 46 percent discount to RNAV.”

 

It rates the stock at Add, with a target of S$2.88.

The stock was up 0.47 percent at S$2.12 at 12:08 P.M. SGT on Tuesday.