LHN Group's Coliwoo Orchard

SINGAPORE: Maybank revised LHN target price from 54 cents to 45 cents, citing lower-than-expected core profits after tax and minority interests (patmi) for the financial year 2023. Despite the downward adjustment, analysts Li Jialin and Eric Ong at Maybank maintain their “buy” call, emphasising the company’s current “undemanding” valuation, The Edge Singapore reports.

In their note on Dec 6, analysts Li and Ong highlighted that LHN’s FY2023 core patmi of S$19 million, excluding fair value loss and disposal gain, fell short of market expectations. This underperformance was attributed to increased financing costs and reduced contributions from joint ventures.

The company’s co-living business emerged as the standout performer, recording a revenue of S$28.3 million for the year. Higher rental rates drove the revenue growth, although occupancy experienced a slight decline due to larger capacity.

“We factor in a stable occupancy rate and rental rates but expect co-living to continue to underpin growth, as LHN aims to add 800 keys each year, as it goes after new tenders,” noted the analysts.

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The company is diversifying its revenue streams, including industrial leasing, which experienced a year-on-year increase of 33%. However, the commercial leasing segment faced challenges, with a 22% year-on-year decline in contributions, primarily due to lumpy revenue recognition.

LHN is diversifying its portfolio by venturing into renewable energy and facilities management, including cleaning services and car parks. Analysts express positivity, saying, “We remain positive on LHN’s growth strategy, but lower our FY2024-2025 core profit forecasts by 14-16% to account for a higher-for-longer interest rate scenario.”

The revised target price of 45 cents, based on 8x FY2024 earnings, is considered reasonable. LHN is currently trading at just 6x forward earnings and 0.6x book value, offering a yield of 6%. LHN’s last transaction was at 32 cents./TISG