UOB KayHian starts Chip Eng Seng at Buy as property proxy

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UOB KayHian started Chip Eng Seng at Buy, with a S$1.38 target price, calling it the cheapest dividend proxy to Singapore’s property recovery.

“With a solid operating and dividend track record (no missed dividends since 1999 listing), reputable developer CES is the dividend proxy to ride on Singapore’s multi-segment property recovery,” UOB KayHian said in a note on Tuesday.

It noted Chip Eng Seng has a S$1.15 billion property portfolio in Singapore and Australia, S$127.5 million in secured profit, a S$1.4 billion development value pipeline and a 4.3 percent 2018 dividend yield, which may get a boost from a special dividend.

Losing the legal overhang

The brokerage said the clearing the overhang from legal issues should “catalyse” the stock’s performance.

”While persistent delays arising form long-running litigation on its Melbourne Tower project had loomed large in the background of this otherwise well-run company and directly impacted its share price, this litigious cloud has since been cleared,” the note said.

The brokerage added that a “large majority” of the company’s property inventory has already been sold, but the profit won’t be recognised until coming years, providing clear earnings visibility with S$127.5 million in profit already secured.

The stock ended Tuesday up 3.19 percent at S$0.97.

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