Brokers’ take: Maybank expects LHN to gain from co-living boom, initiates ‘buy’
Daphne Yow
MAYBANK Securities has initiated coverage on real estate management company LHN with a “buy” call and 12-month target price of S$0.54.
The target price is based on eight times its estimated price-to-earnings ratio for FY2024, which the research team says is a “steep discount” to other larger hospitality players’ average of 15 times.
On Wednesday (Jul 12), Maybank analysts highlighted the stock as a “strong beneficiary” of Singapore’s recovering concert and medical tourism sectors, along with rising demand for interim leasing options post-Covid.
In Maybank’s view, the co-living sector is in a nascent stage due to delays in completion of residential projects, coupled with rising rental and hotel rates.
This in turn makes co-living leases an “attractive” alternative due to their greater flexibility of monthly renewal options, which would benefit the group’s Coliwoo brand as the largest co-living operator by number of keys, said the analysts.
Maybank expects this segment to drive the group’s full-year estimated revenue growth to some S$117 million in FY2023.
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It further projects LHN’s topline to grow 21.3 per cent from FY2022 to FY2025 with a three-year compound annual growth rate of about 7 per cent.
With the anticipated boom from recent sold-out concerts in Singapore, Maybank forecasts the average daily rates for short-term stays at LHN’s Coliwoo Hotel Amber to trend higher during such event periods due to higher demand for short-term accommodation, especially in Q1 2024.
Given Coliwoo Orchard’s close proximity to Mount Elizabeth Hospital, Maybank also sees the flagship property of LHN benefiting from Singapore’s recovering medical tourism industry, particularly with an expected influx of more medical tourists from China as the country further reopens.
The research house further highlighted the possibility of a potential special dividend payout should the offer by Shanghai-listed Milkyway Chemical to acquire LHN’s logistics and transportation arm LHN Logistics go through.
Aside from unlocking shareholder value, this would also enable LHN to devote resources to other core business segments – especially its higher-yielding Coliwoo business, said Maybank.
Its analysts also like LHN for its expansion plans and focus on moving towards an asset-light strategy, which they believe will allow the group to “maximise its growth momentum and quickly build up its market share” without overstretching its balance sheet.
“We expect the group to continue its asset-light strategy in coming years, thus generating faster growth than other co-living players,” said the research team.
Shares of LHN closed at S$0.395, up 3.95 per cent or S$0.015, on Thursday.
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