Brokers' take

TEE Land | Overweight April 7 close: S$0.21 Target price: S$0.33 NRA Capital, April 11

TEE Land Ltd announced its Q3 FY16 results and listed its associated company Chewathai PCL on the Thai stock exchange on April 5. As at Friday, Chewathai's shares are up about 8.1 per cent from the IPO price. TEE Land's results were roughly similar to that of Q2 FY16, delivering stable profitability in spite of challenging local market conditions. The residential units of the latest 183 Longhaus is already about 50 per cent sold, at higher than expected median prices. We expect revenue and profitability to improve in Q4 FY16 on the back of new properties added in Australia.

The listing of Chewathai has diluted TEE Land's stake from 49 per cent to 31.9 per cent. However, the S$15.3 million of net IPO proceeds has maintained TEE's share of assets at about S$13 million - worth S$15.9 million at current share price. More importantly, the new funds place Chewathai on a stable financial footing to expand and contribute more profits to TEE Land with lower risk of additional cash calls. In fact, Chewathai may end up contributing more cash back to TEE Land with its policy of paying at least 40 per cent of net profit after taxes and reserves . . .TEE Land's Chewathai shares are worth about 3.6 Singapore cents per TEE Land share or 0.6 Singapore cents above book value. We revise our forecasts to expect about S$3.5 million of net profit attributable to shareholders for Q4 FY16 ending in May, including S$2 million of fair value gains from overseas assets - potentially more if the properties in Australia can be revalued as investment properties. Currently, TEE Land trades at about 40 per cent discount from its book value. We are of the view that TEE Land is worth more with development and fair value gains factored in, and see TEE Land as an above-average return/moderate risk investment. Downside protection is provided by the 5 per cent yield based on last year's dividend.