GuocoLand | Buy

Target price: S$3.00

April 2 close: S$2.11

Maybank KimEng, March 29

IT will be looking to raise average selling prices for Martin Modern after its recent tender win at Pacific Mansion. With the rising home price environment, its development margins are now better than they were two years ago.

While GuocoLand is concerned over the rising land price environment, it will continue to evaluate land tender opportunities to remain in touch. However, it will focus on projects where it can differentiate itself.

There is no need for capital now. It is in a constant debate over establishing a Reit platform as an alternative funding platform.

A key investor concern is high leverage. Management explained its views on leverage in response to investors' concerns over its relatively high gearing levels. It monitors leverage at the project level and believes it is ok to take on slightly higher leverage in an upcycle. Current leverage is far from levels specified in its debt covenants.

We value GuocoLand at S$3.00, based on a 20 per cent discount to revalued net asset value of S$3.75.

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