Maybank Securities reiterates ‘buy’ call on Coliwoo operator LHN, citing steady growth
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Coliwoo is already the largest operator in Singapore by number of keys, and operates at 13 locations.
PHOTO: COLIWOO
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SINGAPORE – Maybank Securities reiterated its “buy” call on listed co-living and facilities management company LHN Limited, with a 12-month price target of 54 cents.
The report on Tuesday by analysts Li Jialin and Eric Ong cited LHN’s steady growth, potential for higher dividend payouts and general shareholder value enhancement measures.
They also noted that the company reported solid third-quarter 2023 operating metrics, with stable rental rates and improving occupancy for its Coliwoo projects, which now total 2,064 keys (a measure of rooms).
“Meanwhile, its facilities management, carpark and energy subsidiaries continue to secure new contracts. We remain positive on LHN’s prospects and maintain ‘buy’ with a 12-month target price of 54 cents, still based on eight times financial year 2024 price/earnings,” they wrote. “Re-rating catalysts include: Further value-unlocking divestments; potential special dividends; and successful upgrade to the SGX mainboard from its current listing on the Catalist board.”
The company is currently quoted on the Catalist second board, but has signalled its intention to upgrade to the mainboard of the Singapore Exchange in 2023.
Coliwoo, LHN’s co-living brand, is already the largest operator in Singapore by number of keys, and operates at 13 locations, even as it prepares to launch three more assets.
Rental rates across its portfolio range from $2,200 to $3,500 and are supported by strong demand for short stays as Singapore’s inbound tourism rebounds.
But the bulk of its tenants are foreign students and the expatriate working population.
As at early September, its three new co-living assets – Coliwoo Orchard, Coliwoo Lavender Collection and Coliwoo River Valley 298 – reported healthy occupancy levels of well over 90 per cent.
Maybank Securities expects LHN’s core net profit to rise to $24 million in 2023, from $20 million in 2022, and then hit $28 million in 2025.
It also cited the company’s new dividend policy of a minimum 30 per cent payout ratio, which would be supported by both growth and capital recycling.
Earlier in 2023, LHN accepted a Shanghai-listed company’s offer
The transaction will generate $32 million in cash proceeds
While a portion of the funds would go towards paying down debt and working capital, analysts expect the company to also reward shareholders with a special dividend payout.
Maybank Securities also noted that LHN is tilting towards an asset-light strategy by divesting a portfolio of assets that are in the money.
“Management is also actively looking for more opportunities to recycle capital to unlock value from mature assets, such as its industrial property at 55 Tuas South Avenue 1 ($21 million), which is scheduled to complete redevelopment by the fourth quarter of 2024,” it said.
Meanwhile, LHN’s facilities management arm secured 35 new contracts and re-tendered for 22 for services that range from cleaning, disinfecting and pest control to landscaping, minor building improvements and integrated smart tech solutions. It has also launched six new carparks since May 2023, taking the total to 760 parking spaces.
The group has been actively expanding its energy business portfolio. To date, it has installed – and is managing – 21 solar energy projects with a combined capacity of 3.1MW of renewable energy. Another four projects are in progress and are expected to contribute 0.6MW.
Maybank Securities reckons that given its business portfolio, growth momentum and value proposition, LHN is trading at a deep discount to its regional peers. The stock has been trading in the range of 32 cents to 33 cents in recent weeks.
