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Thursday, June 6, 2013

SIAS Research highlights King Wan Corp's bargain power in buying ships


SIAS Research highlights King Wan Corp's bargain power in buying ships

Analyst: Ng Kian Teck

We are revising our FY14/15 numbers upward slightly and this resulted in a higher intrinsic value of S$0.420 per share. Maintain Increase Exposure.

King Wan increased its stake in Meadows Bright Development Pte Ltd from 35% to 40% recently and now holds an effective stake of 17.5% in the Dairy Farm project. 

The project is likely to be launched over the next two months and TOP sometime in 2015/2016. The selling price should be around S$1,300 psf while breakeven cost should be around S$1,000.
At the same time, the Starlight Suites is about 55-60% sold.

Between Feb to May 2013, King Wan secured six new M&E projects in Singapore worth S$28.4m. They are expected to be completed by 2016.
Current order book stood at S$166.6m, similar to that of the previous quarter.
Management also highlighted that they have taken the possible hike in labour price into consideration and mitigated it via several measures such as engaging in subcontractors and bidding projects with a slight price buffer. 

The listing of KTIS (which holds King Wan’s interest in the two Thai Associates) is expected to be around July 2013 and we reckon that King Wan will probably hold on to the bulk of its shares unless KTIS’ share price spiked up or the former is in need of cash for certain huge expansion/investment.
King Wan is currently exploring investment opportunities, particularly at the dry bulk shipping arena. 

Management cited that the unavailability of bank financing and poor market sentiment are keeping vessel prices low, which led to bargaining opportunities for King Wan. 

While IRR are low now, upside can be derived from higher future chartering rates and capital appreciation in vessel prices. 

King Wan had exhibited great investment foresight in the past with its involvement in Cables International, the two Thai Associates and several property developments. We are optimistic about their recent vessel joint venture. 

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