DBS prices LHN stock at 81 cents on potential Coliwoo listing

SINGAPORE: LHN Group is preparing to spin off its co-living arm, Coliwoo, as a separately listed entity on the Singapore Exchange (SGX) and Hong Kong Exchange (HKEX). The real estate management company has submitted listing applications to both SGX and HKEX and expects to list within the next six to 12 months.

Investor interest in LHN has grown in tandem with the success of Coliwoo, with its stock rising 25% year-to-date. DBS Group Research gave LHN a valuation target of 81 cents on the back of this news, and priced Coliwoo stock between 45 cents to 61 cents.

This puts the value of Coliwoo at between S$187 million to S$246 million. Since launching in 2019, Coliwoo has added more than 2,500 keys in Singapore and in excess of 300 keys overseas. In the context of coliving and the hospitality sector, keys refer to individual rooms and shared spaces.

SGX issued a preliminary opinion that the move does not constitute a chain listing, although the plan is still at an early stage and there’s no certainty it will proceed. LHN plans to retain a majority stake and controlling interest in Coliwoo post-listing.

The SGX Rulebooks say about chain listing: “A subsidiary or parent company of an existing listed issuer will not normally be considered suitable for listing if the assets and operations of the applicant are substantially the same as those of the existing issuer.”

What’s unique about the planned listing is that it presents an opportunity for public investment in a sector that mostly stays in private sector hands. Coliwoo has emerged as one of Singapore’s leading co-living providers, managing 2,595 rooms locally, with another 329 rooms abroad.

Its competitive edge lies in its ability to acquire and transform large properties through master leases or direct purchases. This lets it offer fully serviced spaces for short- to medium-term stays at affordable rates.

Several factors are fuelling housing demand in Singapore. More regional corporate headquarters in the city-state, coupled with increased foreign student enrolments, as well as the growth in younger workers seeking more agile living arrangements, are growth drivers.

Coliwoo’s flagship properties in Singapore include 31 Boon Lay Drive, with 437 rooms, and 2 Mt Elizabeth Link, which houses 411 rooms.

LHN operates in four main business lines: space optimisation, property development, facilities management, and energy. According to Executive Chairman Kelvin Lim, the group plans to expand in the co-living sector, especially through hotel and serviced apartment conversions.

If successful, the Coliwoo spin-off will create value by offering access to a rapidly evolving co-living market. Solid fundamentals and growing demand mean Coliwoo is well-positioned to adapt to urban living trends.

Coliwoo intends to use the spin-off to facilitate independent fundraising and capital allocation. As part of LHN, capital allocated to it restricted the growth of other business lines. With a target growth rate of 800 new rooms annually, the main issue affecting the company is capital availability.

A separate listing will let it raise funds on its own and accelerate growth via larger-scale projects. Coliwoo’s management sees prospects for international growth and believes it will unlock shareholder value. LHN will continue to receive dividends from Coliwoo while also sustaining its own financial health.