While still in its early stages, any positive development to Hotels Properties Limited’s (HPL) H15 development proposal for its Orchard assets could yield a “significant upside” to its revised net asset value (RNAV) of $5.80 per share, says DBS Group Research.
According to media reports, HPL had submitted a development proposal to the Urban Redevelopment Authority (URA) in relation to its assets in Orchard Road, The Forum Mall, Voco Orchard and HPL House.
DBS’s RNAV of $5.80 is currently valued by the team on an “as-if” basis and does not factor in any rejuvenation potential.
The assets measure a total of some 150,000 sq ft of gross floor area (GFA) and are understood to be proposed for rezoning from commercial to a potential mixed-use development that totals 700,000 sq ft, the team notes.
“HPL’s land parcels could fit under the URA’s Strategic Development Incentive (SDI) Scheme, which allows owners higher plot ratios and flexibility on land use and height,” it adds.
That said, if approved, the project is likely to require “significant capital expenditure”, which begs the question as to whether the group will seek capital partners to develop the site together.
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“We think there could be a mega luxury development, involving retail, commercial, hospitality and residential components could be on the cards, complementing the offerings that ION Orchard, which sits atop Orchard MRT station. Apart from the three assets, we note that HPL also owns the land of Four Seasons Hotel Singapore, which is located behind the newly opened Voco Orchard,” it writes.
DBS initiated coverage on HPL in February with a “buy” recommendation and a target price of $4.35. Based on its note dated June 12, that has not been changed.
As at 3.58pm, shares in HPL are trading 12 cents lower or 3.02% down at $3.85
