Wheelock Properties - “Birds of the same feather flock together”

􀂾 Story: Wheelock’s recent purchase of 10% stake in SC Global
follows another recent transaction of Wheelock’s strategic stake
in HPL which is already paying huge dividends, sitting on gains
in excess of S$400m.
􀂾 Point: The purchase allows Wheelock to have a piece of the
pie in SC Global’s high-end residential landbank, further
enhancing its exposure to the high-end residential market when
land accumulation is impeded by escalating land prices.
􀂾 Relevance: Factoring in potential gains from the stake in SC
Global, higher gains from its stake in HPL as well as higher
project selling prices for Wheelock’s residential projects, we
reiterate our BUY recommendation for Wheelock with adjusted
target price of S$ 4.17 with 20% premium on revised RNAV
which now stands at S$3.48.
10% stake in SC Global, back door for prime sites. Wheelock has
acquired a 10% stake in SC Global for S$112m at S$6 per share from
Simon Cheong. We continue to reiterate Wheelock’s good reading of
the market, buying into physical property when the market is
lukewarm and raking in development profits in the property upcycle;
buying into well managed property companies which offer value
potential exemplified by its recent acquisition of the strategic stake in
HPL and now SC Global, which holds about 0.8m sf and 1m sf sqf of
landbank respectively with land prices high and squeezing property
development margins. The investment in HPL has already paid huge
dividends and sitting on gains in excess of S$400m.
Similar positioning offers synergy. With all 21 apartments in the 1st
phase of The Marq on Paterson Hill sold at an average S$4,137 psf, we
believe there would be positive spillover effect on Wheelock’s next
three upcoming projects. This could then set off a second wave of
synergistic effects for SC Global’s recent site acquisition of The
Ardmore, of which Wheelock now shares part of the pie as a strategic
holder of SC Global. Collectively, both entities could enjoy pricing
power of high-end projects in the prime residential districts of Orchard
Road.
Reiterating Buy, reinforced by potential gains from SC Global
investment, higher selling price assumptions. Along with Wheelock’s
conviction in SC Global with a 10% strategic stake, we share the same
optimism and now factor in potential gains of S$60m from this piece of
investment pegged to our current target price for SC Global at S$8.40
per share. After raising residential selling prices for Wheelock’s projects
to average ASPs of S$4,000 psf which may still surprise on the upside,
our revised RNAV now stands at S$3.48 which derives target price of S$
4.17, maintaining 20% premium on account of further potential upside
from higher residential project ASPs. Reiterate Buy on Wheelock, with
positive newsflow on selling prices of project launches in Scotts Square
Residences as well as SC Global's projects to provide support for
Wheelock's share price.