King Wan Corporation's Skywoods should launch in 2QFY14

And boost property-related income, forecasts OSK-DMG.

The research firm notes that King Wan Corporation is simply holding off on the launch until the Hungry Ghost Festival is over in September. With Skywoods expected to launch soon, property-related income can be expected to be factored into the company books in the next quarters.

Here's more from OSK-DMG:

Strong core operations. KWAN’s mechanical & electrical (M&E) division delivered another strong quarter as revenue surged 94% y-o-y to SGD25.1m at a gross margin of 15.4%. While the y-o-y margin is down from 18.8%, this is a normalised level reflecting fewer high-margin projects. The bottomline expanded by 81% y-o-y on the back of the high volume of work, with net margins stable at 10.2% vs 10.9% a year ago.

Skywoods to launch after lunar seventh month. The Dairy Farm Road project, named Skywoods, is ready to be launched. In deference to Chinese tradition, KWAN is holding off on the launch until the Hungry Ghost Festival is over in September. Thus, we expect property-related income to be factored into its books in the next quarters.

Kaset Thai Industry Sugar (KTIS) has applied for IPO. The Securities and Exchange Commission (SEC) in Thailand has allowed KTIS to begin marketing its shares. Formal approval should be received by 18 Aug, following which KTIS has six months to list the company. This adds another level of certainty to the anticipated IPO as well as the declaration of the 1.5-cent special dividend.

Low P/E IPO actually benefits KWAN. The Thai stock market seems a little shaky, which could lead to KTIS listing at a lower P/E. This has two benefits for KWAN: i) it could end up with a greater stake in KTIS for its SGD50m Thai Associates, and ii) its investment could see more upside potential.

Worth the wait - maintain BUY with a SGD0.43 TP. Although the IPO has been long in coming, the end-goal is in sight. Investors can expect a 9.4% yield, plus capital appreciation as the market compresses the yield. Maintain BUY with a TP of SGD0.43.

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