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Promising Outlook For TA Corporation Despite Increase In Policy Risk
Corporate Digest | 30 March 2012
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Unexpectedly, robust buying momentum in new private homes continued into February despite the fifth round of cooling measures implemented in December 2011 by the Singapore government. Property developers continued to see strong primary home sales in February, posting a whopping 51 percent month-on-month increase to a record of 3,138 units. According to the Urban Redevelopment Authority, 2,413 new private homes, excluding executive condominiums, were sold in February, translating to a 29 percent rise over the 1,872 units sold last month. This was the highest monthly figure since July 2009.

In view of the strong two months sales that have already hit 4,200 units, most analysts expect demand to hold up in March and sales to remain healthy going forward even though strong volumes may heighten the risk of additional policy measures to ‘cool’ the property market. Furthermore, low interest rates are fuelling demand for private properties.

As developers seek to accelerate new project launches to ride the strong buying waves, there has been a spur in demand for building construction. In its report, the Building and Construction Authority of Singapore projected total construction demand for 2012 to be between $21 billion and $27 billion.

This might serve as indicators that TA Corporation Ltd (TA Corp), a company principally involved in real estate development and the construction business, is well positioned to benefit from the strong construction and property demand.

Construction Sector Still Looking Good
For the year ended 31 December 2011, TA Corp reported revenue from its construction business increased by 11.8 percent year-on-year to $160.2 million. “This was attributed to higher contribution from our ongoing projects such as Nouvel 18, Viva, Foresque Residences and Starlight Suites,” Mr Neo Tiam Boon, the chief executive officer and executive director of TA Corp told Shares Investment during an exclusive interview. “We are well positioned to benefit from the stream of construction projects from the public and private sectors in the coming years,” Mr Neo said.

With forty years of invaluable experience in the construction industry, TA Corp has since completed numerous building projects and counts prominent names including CapitaLand, Keppel Land, Wheelock Properties, Wing Tai Holdings, Allgreen Properties and The Ascott Group as its major clientele. TA Corp has also been able to gain the confidence of new and, more importantly, existing customers due to its impeccable track record in public and private sector construction projects. This was evidenced when the company secured two construction contracts from Allgreen Properties with a combined value of $271 million in November 2011.

As pointed out by Mr Neo, TA Corp remains confident on the performance of its construction business on the back of the company’s strong construction order book that stood at $526 million as at 31 December 2011. “We will fulfill the order book over the next 36 months,” Mr Neo highlighted. He added that TA Corp will continue to engage with developers for more projects going forward.

Property Sector Still Hot
In an effort to broaden its revenue stream, TA Corp made its foray into property development in 1995 and has since established a name for itself as a niche real estate developer focusing on freehold apartments and condominiums.

For the year ended 31 December 2011, the Mainboard-listed company posted a 24.9 percent growth in its real estate development business revenue to $124.5 million as compared to $99.7 million recorded in FY10. “Our ongoing residential developments, Parc Seabreeze, Coralis and Auralis have contributed significantly to our top line,” Mr Neo remarked.

Impressively, TA Corp recorded take-up rate of over 90 to 100 percent for recent launches of its ongoing property developments, testament to the company’s real estate development business’ robust performance.

Despite the challenging operating environment as a result of cooling measures on the property market, Mr Neo believes that there continues to be strong demand for their quality freehold condominiums. “Our buyers are not upgraders, they are investors who are familiar with this niche market,” he said.

“In fact, we believe that property prices could drop 5 to 10 percent this year, but we are not overtly concerned,” Mr Neo opined when asked for his view on Singapore’s real estate market in 2012. “Look at the prices of land now. It has gone down by as much as 20 percent and this creates opportunities for us to acquire suitable land plots with lower prices to augment our land bank,” Mr Neo explained.

Expanding Into ‘Hot’ Economies
Not rooting itself within domestic boundaries where land is limited, TA Corp has set its sights on emerging economies. And where best to look than one of the best eco-cities in China – Dalian City, which was awarded the honorary ‘Eco-City in China 2010’. Currently, TA Corp is actively engaged in a township project named ‘Singapore Garden’ via its 25.37 percent-owned associate Dalian Shicheng PRC. Largely catered to residential demand, the project has seen six successful launches thus far, with the next phase hot on its heels.

Furthermore, the eighth stage of the project, which sits in the company’s land bank, will see what Mr Neo views as ‘the neglected segment of real estate developments’ – the commercial portion. Accordingly, a diverse pool of developments encompassing commercial, shopping complex, hotels and small/home offices will be established in that phase. Reaping dividends from such developments could very much turn into reality as the commercial sector grows.

In a bid to further ensure earnings visibility, TA Corp has in its pipeline another freehold site with 5,078 square metres in land area situated in the capital of Cambodia, Phnom Penh. Construction of the semi-detached villas on the site is underway and TA Corp is expecting the project to be launched within the first half of the year. Echoing the flow of investments that has flocked to this market, the company believes that the real estate segment in Cambodia will do well in the next two to three years.

Besides the abovementioned, TA Corp is progressively making headway into India. The company is now operating a worker training and test centre in Chennai, one of four licensed centres in the country. In view of the test centre’s prime location in the country’s core IT hub region, should the opportunity arise, the company may explore the possibilities to redevelop this piece of land.

Financially Healthy
Following its initial public offering in November 2011, TA Corp’s balance sheet has strengthened considerably. Cash and bank balances nearly doubled from FY10’s $47.8 million to $91 million as at 31 December 2011. This has in part helped to pare its gearing from 1.3 times to a current 1 time. Hence, we believe that TA Corp is poised to ride out any near-term volatility.

A boon for investors, TA Corp has declared a first and final dividend amounting to 1.2 cents a share for FY11. This represents a two-fold jump in the company’s promise stated in its prospectus. Based on 23 March 2012’s closing price of $0.245, this translates to a dividend yield of 4.9 percent. The counter is also trading at a 33.1% discount to its net asset value as at the time of writing.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

TA Corp  -- -- --   
Business: Co is engaged in the construction industry as well as the devt & sale of residential & other types of ppties. [FY17 Turnover] Construction (67.8%), real estate invs (7.3%) real estate devt (13.1%) & distribution & others (11.8%).

Insight: Nov-18, 9M18 revenue fell 41.9% to $92.4m mainly a... Read More


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