Li Jialin and Eric Ong of Maybank Securities have kept their "buy" call and 45 cents target price for LHN after the co-living operator announced it is adding two new developments to its portfolio.
First, LHN won a government tender for the former Bukit Timah fire station, which will be refurbished at a cost of $7 million to become a mixed-use project with 60 serviced apartment units on levels 2 & 3, and a ground floor commercial F&B and retail operation.
According to LHN, this site will serve as a key community node for both the Rail Corridor and the surrounding precinct and is expected to be open by June 2025.
"In our view, the Bukit Timah project should capitalize on LHN’s expertise and synergy across its business units in co-living, commercial and facility management," write Li and Ong in their April 11 note.
Meanwhile, LHN is also teaming up with Oxley Holdings 5UX CEO Ching Chiat Kwong and his son Shawn Ching in a 50-50 joint venture to acquire Wilmer Place, which is at 50 Armenian Street, near the City Hall MRT.
According to the Maybank analysts, the office building could remain as a commercial building or be re-purposed for LHN's co-living business.
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With a land area of 710.7 sqm, the leasehold building has a tenure of 99 years from 1 May 1947. This should enable the LHN, which is spending up to $24 million for this project, to expand its co-living offerings under its space optimization business segment.
In total, LHN has 6 upcoming projects, including the Ministry of Health hostel for 700 nursing professionals.
To help fund this growth, LHN is offering commercial paper of up to $5 million, at a 6% interest rate
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With MOH proposing another 11 other sites, this suggests possible re-rating catalysts for LHN if it can secure more of these projects, according to the Maybank analysts.
Their target price of 45 cents is pegged at 8 times forward FY2024 earnings.
LHN shares changed hands at 34 cents as at 2.05pm, up 1.52% for the day.
