Maybank Securities analysts Li Jialin and Eric Ong are keeping “buy” on LHN Group with a target price of 43 cents following the release of its 3QFY2024 ended June business update.
At its briefing, LHN guided for stable operations at its Coliwoo assets, supported by incremental demand from more tourists and summer-holiday makers, the analysts note.
“The average occupancy rate of its co-living portfolio edged up from 91.8% in 1HFY2024 to about 95% in 3QFY2024, helped by competitive pricing and the newly launched River Valley assets as they continue to be ramped up.
“Two Coliwoo assets leased to the Ministry of Health and Holdings (MOHH) are expected to start contributing from September onwards,” they add.
Projects in the pipeline in FY2025 include Arab street and the GSM building. Overall, LHN expects the total number of keys to exceed 3,000 by 2QFY2025.
LHN targets its food processing factory (55 Tuas South Avenue) to achieve a Temporary Occupation Permit (TOP) in September and the subsequent sale of 49 strata units over the next six to 12 months.
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“Management estimates $10 million in pre-tax profit from the sale of the food factory. LHN owns 60% stake in this development project,” the analysts say.
In 3QFY2024, LHN also secured three solar energy contracts with a combined capacity of approximately 0.8 megawatts (MWs). Supported by an attractive internal rate of return of 20%-30%, management intends to build upon its existing capacity of 6MWs.
Despite the renewable energy market being competitive, the company targets to increase solar energy capacity by 2 MWs per year.
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In July, LHN divested its 40% stake in the Bukit Timah Shopping Centre car park for estimated net proceeds of $4 million after offsetting bank loan. This will be used for working capital or strategic mergers and acquisitions.
The company is open to explore master lease opportunities in Asean, targeting around 200 keys. LHN manages two car parks with over 800 lots in Hong Kong but may look to exit its loss-making operations in the city at the end of the year due to the challenging macro environment.
As at 1HFY2024, LHN has a gearing of 58.1%and 45% hedge-to-floating ratio, and hence, lower interest rates would benefit LHN, the analysts highlight.
As at 11.54am, shares in LHN are trading flat at 33.5 cents.
