Maybank Securities' Li Jialin and Eric Ong have maintained their 'buy' call and 54 cents target price on co-living play LHN, given how the company's recently reported operating metrics which puts it on track to meet their positive expectations.
For its 3QFY2023, LHN reported rental rates across its portfolio at between $2,200 and $3,500 per month, supported by strong demand for short-term stay. Its new assets are seen doing well, with Coliwoo Orchard, Lavender and 298 River Valley achieving healthy occupancy levels of 90%, 85% and 100%, respectively, as at Sept 7.
LHN is constantly expanding too, and in the words of Li and Ong, "firing on all cylinders". Since August, it has acquired 286 & 288 River Valley and 99 Rangoon Rd. Total cost including refitting to be around $16 million.
Three other properties, 404 Pasir Panjang as well as 48 and 50 Arab Street are being renovated and are on track to be operational in 2Q24, the analysts note.
LHN is chalking new growth in its facilities management business too, which won 35 new contracts and retendered for 22 services such as cleaning, disinfecting and pest control.
Since May, LHN has launched 6 new carparks, taking the total it manages to 760 lots. It is actively expanding its energy business portfolio as well, with 21 solar energy projects installed and being managed. Another four projects are in progress and will bring total capacity to 3.7 MW.
The Maybank analysts like LHN too for its recycling moves. From the sale of its separately listed subsidiary LHN Logistics, LHN has received net proceeds of some $28.8 million which will be used to pare debt, working capital and potential special dividends.
Li and Ong also note that LHN is looking at divesting mature assets such as its industrial property at 55 Tuas South, worth some $21 million, as part of the recycling.
The freed-up capital, presumably, will go towards funding its goal of adding 800 keys a year and besides acquisitions of additional properties, LHN aims to sign large management contracts with joint venture partners.
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The analysts' target price of 54 cents is based on 8x forward earnings. Possible re-rating catalysts will include further value unlocking via divestments, potential special dividends and also the successful upgrade from Catalist to the Mainboard.
LHN shares changed hands at 33 cents as at $3.15, up 1.56% for the day.
