Resilient office rents propped up Ho Bee’s profits in Q3

Net profit jumped 83.2% last quarter.

Ho Bee Land depended on its office portfolio for profits in the third quarter, amid persistent headwinds in the local residential sector.

Ho Bee’s net profit jumped 83.2% to $13.4m in Q3 from $7.3m in the same period last year, propped up by rental income from its undervalued office portfolio.

According to CIMB, Ho Bee continues to execute its strategy of building recurring income in the quarter, illustrated by its acquisition of another office asset in London in Q3.

“We estimate that office assets in Singapore and London make up ~67% of Ho Bee’s GAV, all of which are fully leased. Singapore office REITs are trading at 0.9x P/BV, while Ho Bee is trading at 0.57x FY14 P/BV. Additionally, we believe that its book value is undervalued, with Metropolis merely at S$1,151 psf NLA, vs. comparable office transactions of S$1,700-1,900 psf. We remain positive on the office sector, with low supply being the main push factor for a continuation of rental reversion into 2015. Ho Bee offers a cheap way to gain exposure to office assets in Singapore, at a 47% discount to RNAV,” noted CIMB.

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