Soilbuild is an integrated property developer with a development portfolio of mid to high-end residential properties and business space properties for multi-national corporations and SMEs.
With an established track record of more than 30 years, the Group has successfully acquired and developed a range of residential properties mainly in prime urban districts with features that appeal to cosmopolitan buyers
Soilbuild Current Projects
As taken from soilbuild.comWhy Soilbuild?
What I like about Soilbuild is that it is focused on 2 different types of developments: Residential and Commercial. As mentioned in one of my earlier posts, I am neutral on residential property development. By being involved in these 2 different sectors, Soilbuild seeks to remove the cyclical nature of property developers.
Furthermore, what has attracted me to Soilbuild is that it is focusing on reaching $40million in recurring rental income by 2012. Soilbuild's dividend payout is determined by its rental income, of which 50% of recurring income is paid out. This translates to approximately 7 cents/share in 2012 based on current number of shares. Its special dividend payout is determined by sales of its property.
Soilbuild Revenue Recognition
Development properties refer to properties under development for sale.
(a) Unsold development properties
Development properties that are unsold are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less cost to complete the development and selling expenses.
(b) Sold development properties
Revenue and cost on development properties that have been sold are recognised using the percentage of completion method. The percentage of completion is measured by reference to the development costs incurred to date to the estimated total development costs for the development property, which is supported by the physical surveys of construction work completed. When it is probable that the total development costs will exceed the total revenue, the expected loss is recognised as an expense immediately.
The aggregated costs incurred and the profit/loss recognised in each development property that has been sold are compared against progress billings up to the financial year-end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as due from customers on development properties, under “trade and other receivables”. Where progress
billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as due to customers on development properties, under “trade and other payables”.
Soilbuild Financials
Soilbuild's revenue is mainly driven by 2 businesses - Sale of Development Properties and Rental from Investment Properties.From 2007 to 2008,
- YOY revenue increased by 125% and 158% for Sale and Rental respectively
- Rental income was at 9,904k
- Operating Profit YOY was 99,901k, up 47%, and 42% of sales
- Operating Profit less FV changes was 74,310k, up 205%, and 31% of sales
- Net Profit was 76,462k, up 46% YOY
- P/E ratio was 4.9
- NAV was 0.69
- ROE was 39%
- FCF was negative
From 2008 to 2009,
- YOY revenue increased by 34% and 49% respectively for Sale and Rental
- Rental Income was 14,770k
- Operating Profit YOY was 111,091k, up 11% from the previous year, and 35% of sales
- Operating Profit less FV changes was 97,614k, up 31% from the previous year, 30% of sales
- Net Profit was up 10% to 84,306k, 26% of sales
- P/E ratio was 2.42
- ROE was 31%
- Positive FCF of 161,922k
Comparison with Other Companies
Ho Bee recorded a record revenue this year, and Net Profit was up 261% YOY. Rental Income was 20,154k, 2% of sales, up 22% YOY, while sales was up 309% at 1.134billion. P/E was at 3.78, and NAV was 2.50. ROE was at 30%, P/B was at 1.04.
Keppel Land's profit was up 11%, however operating profit was down YOY. It was trading at a historical P/E of 14 for FY2009. NAV for Keppel Land was 0.92 for FY2009.
One thing to consider about Keppel Land was that its finance expense was 6% of sales. However, one thing that Keppel Land has going for it is that it has a (1) a huge land bank at Keppel Bay, and (2) it has many high end developments that would bring in the revenue over the next 2 years.
Conclusion
I am still neutral about residential property, with a bias towards the underweight side.
For me, the attractive thing about Soilbuild is that it has a focus developing rental income, and also does property sales. The focus on increasing recurring rental income would eliminate one issue for property developers - that they are cyclical.
One thing for investors to watch out for is that Soilbuild's stock is pretty illiquid. Besides that, as compared to the bigger developers, Soilbuild does not have a huge landbank, and that may cause problems in the future for property sales. What I wish to watch out for is that Soilbuild does not rely solely on recurring rental income.
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