This will just be a short update into what I have been accumulating so far.
I have written a couple of articles in the past about the company that I believe will do well for the company. If you are interested, you can find them here:
The past week has been rather brutal in the market. I think we've lost about maybe 4% in the market just about 5 days trading into the new year. While most people have been busy scooping up popular blue chip shares such as DBS, OCBC, Singtel, Keppel, SembCorp, to name a few, I've gone into a different direction by accumulating into my existing position for HoBee Land for 10,000 shares at a price of $1.97. This is funded from both the internal funds and some divestment which I have made (will talk about this in my portfolio update).
There's not much different to the thesis I've mentioned to the earlier article but I'll try to see if I can present it differently.
We know just about how much acquisitions they have made over the past years and sometimes it can be very confusing for the market to digest them especially if these earnings are not yet "realized". So what I did was to try and project these earnings into the next few years and try to see if there are value in the current share price. The highlight is probably on Hobee trying to repeat what they've done back post 92s era where the UK market has somewhat bottomed after a cycle and they went gone into the market at an opportune time.
Their latest 9M earnings have shown how much these rental income will contribute to their bottomline. These did not yet include the contributions from their latest two acquisitions of the 110 Park Street and Apollo / Lunar House at Croydon. If you read my previous article on Hobee, you would have known that their latest 2 acquisitions are highly accretive because not only are they getting a recurrent lease longer but they are also reversionary in nature due to the low passing rents. The current cap rates they are signing off for is currently at 4.5% and 5.35% but I expect this to be revised upwards in the future organically.
I'm expecting forward earnings based on only rental income to come in next year at $70 millions, which indicates an earnings yield of about 6%. They still have their development properties both local and overseas which has not yet been included yet should they materialize. The key play over here is the reversionary nature of those rental income upwards over time so we can expect an even higher cap rates they have. Any sales towards their development properties will be a bonus if there are any.
As I've mentioned in the past, I'm looking at this investment as a long term play where the value will only be extracted when they are given time to shine.
I think as a company, their recurring income as an operating cashflow are there to support the business when their development properties are facing some headwinds but much will depend on their strategic move into the UK and see if they will be successful once again.
A commercial reit offing may be on the wild cards should they decide to recycle the capital given the huge investment properties value they have on their books now. The company has been repurchasing their share back in the past few months and have now held about 73.4% but I reckon privatization will not take place in the near term. Since it is a good company, I won't be in the rush wanting the company privatized anyway.
*vested 16,000 shares as of writing