LHN' s lower-than-expected core patmi has prompted Maybank Securities analysts to cut their target price from 54 cents to 45 cents.

 

Nonetheless, given the " undemanding" valuation now, analysts Li Jialin and Eric Ong have maintained their " buy" call.

 

The company' s FY2023 core patmi of $19 million, which excludes fair value loss and disposal gain, was below market expectations, no thanks to higher financing costs and lower contribution from joint ventures, state Li and Ong in their Dec 6 note.

 

The company plans to pay out a final dividend of one cent, plus a special dividend of another cent.

 

The key performing segment was LHN' s co-living business, which reported revenue of $28.3 million for the year, thanks to higher rental rates although occupancy dipped because of a 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.

 

Meanwhile, it is expanding its other income sources too, such as industrial leasing, which grew by 33% y-o-y.

 

On the other hand, contributions from commercial leasing declined 22% y-o-y due to lumpy revenue recognition. 

 

In addition, LHN is expanding elsewhere such as renewable energy and facilities management including car parks and cleaning services.

 

" We remain positive on LHN&rsquo s growth strategy, but lower our FY2024-2025 core profit forecasts by 14-16% to account for a higher-for-longer interest rate scenario," say Li and Ong.

 

The new target price of 45 cents, based on 8x FY2024 earnings, is deemed undemanding, given how it is now trading at just 6x forward earnings and 0.6x book value while giving a yield of 6%.

LHN Group FY2023 Results Briefing DEC 2023