Far Eastern Orchard's revenue crashed 52% to SGD140m

Its Flordian project disappoints.

According to Maybank Kim Eng, Far East Orchard's FY12 revenue and core PATMI beat street estimates of SGD111m and 60.2m respectively. FY12 revenue at SGD140m (-52% YoY) was 126% of our estimate.

Maybank adds, the YoY decrease was primarily due to lower revenue recognition from the property development project, The Floridian, of which 94% of the project was sold and revenue recognised prior to 1 Jan 2012.

Here's more:

The newly acquired NMC/NSC units and hospitality management business also made their maiden contribution of SGD5m and SGD5.3m respectively, spanning a period from 27 Aug till 31 Dec 2012. We estimate average gross rentals for the medical units to be ~SGD10.50 psf/mth.

FY12 core PATMI at SGD73m (-39% YoY) was 121% of our estimate. Gearing remains stable at 4% (Debt/Asset), with only SGD70m borrowings. FEOR also announced a proposed final dividend of 6cts versus 3cts in FY11.

The need to replenish land-bank. Contribution from FEOR's property development business will ease as it had recognised the final profit from the Floridian project (TOP on 5 Mar 2012) in 3Q12 (remaining 6% of project).

Almost 94% of the total units in euHabitat have also been sold and we expect the bulk of revenue to be progressively recognised in FY13-FY14.

The Bassein Road JV is in the early stage of development and no recognition of revenue is expected until FY14. Armed with fresh dry powder post-restructuring, we think FEOR is in a in a good position to capitalize on growth opportunities ahead.

We expect to see more involvement from FEOR and its partners in GLS biddings moving forward.

Investment thesis intact. We continue to like FEOR for the following reasons:

(1) Possible synergies with its parent - Far East Organisation (FEO), who is Singapore's largest private developer (built 1-in-6 private homes in SG) with purportedly the largest onshore asset and land bank (~80m sqft) [Note: FEO sold the most number of dwelling units in 2012]

(2) Clear focus post-restructuring, with emphasis on residential development (24% GAV), healthcare (21% GAV) and hospitality management (22% GAV).

(3) FEO will inject future healthcare assets into FEOR, which we expect to benefit from rising medical tourism.

(4) Undervalued in our view, with net cash already at SGD1.11.

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