Brokers' take: KGI starts coverage on LHN with 'outperform', S$0.49 target

REAL estate management service group LHN Limited 41O : 41O 0%is poised to benefit from the growing co-living trend, an expected influx of travellers as borders reopen as well as the current shipping industry boom, according to KGI Securities.

The brokerage has initiated the stock with an "outperform" recommendation and S$0.49 target price, based on a 6 times price-to-equity peg to its FY2022 earnings per share estimate of 8.2 Singapore cents.

In a report on Tuesday, analyst Megan Choo said she sees LHN's current valuations as attractive, given its 10 per cent discount to book and decent dividend yield.

She anticipates solid FY2022 revenue growth from the group's primary space optimisation business, as all four of its recently acquired residential properties are slated to commence operations during the fiscal year.

"With the gradual reopening of borders, increased vaccinations rates and an increasing trend among millennials shifting out of their homes, we expect the residential segment to recover going forward," she said.

The group also provides dormitory management services under its new facilities management segment business, which Ms Choo considers a "new winner" among the group's three main business segments due to its strong revenue contributions in H1 FY2021.

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Considering the supplementary relationship between LHN's facilities management and space optimisation segments, she thinks both businesses are set to expand.

Ms Choo also believes LHN's logistics management segment is on track for growth in line with robust shipping activity, given its firm and expanding foothold in the region.

The group currently has 8,200 twenty-foot equivalent units (TEUs) of cargo capacity in Singapore. In Thailand, it has capacities of 7,000 TEUs and 10,000 TEUs at its container depots in Laem Chabang and Bangkok, respectively.

"Even though it is likely that ports will eventually start to clear and the effects of Covid-19 taper off - leading to a correction in sky-high shipping prices - Asean and Singapore remain as crucial shipping hubs with robust port activity. Having a firm and expanding foothold in this area, LHN would still seek to benefit from its container management services," she said.

Shares of LHN closed 2 Singapore cents or 6.4 per cent higher at 33.5 cents on Tuesday.

READ MORE: 

• LHN to raise S$2.2m in private placement of up to 6.5m new shares
• LHN on aggressive hunt for more properties for its co-living business
• LHN buys hotel property at 115 Geylang Road