Wheelock Properties

14 Jan 2009

Like most property developers, Wheelock Properties has seen its share price go south. But there are still two brokerages calling for a BUY on its stock given its management's track record of timing property cycles in the past.

Depressed property market aside, is this property counter a value stock?

Wheelock is a property owner and developer. It owns commercial building Wheelock Place and is developing the new Scotts Square. It develops condos like Orchard View and counts among its portfolio The Cosmopolitan and Parc Oasis.

The price to book ratio (P/B) for Wheelock is 0.56. It is below 1 and looks pretty cheap, so a tick here.

Wheelock said in its Q3 report that it has S$800m of cash on hand after collecting 25% of the sales proceeds upon the TOP of The Cosmopolitan in October 2008. It expects to earn more from the on-going progressive billings of development properties. It also believes it is in a strong financial position to take advantage of opportunities which may arise. There are no specifics in this statement, although it is useful. We have to give it a question mark here.

Wheelock Properties changed its financial year from 31 March to 31 December, so its last financial year was made up of only 9 months. For that period, it declared a dividend of 6 cents. Based on its last traded share price of S$1.00, this comes up to a dividend yield of 6%. That is so much better than putting your money in a bank. So a tick to Wheelock in this category.

In fact, Wheelock CEO David Lawrence was buying property counters when he was interviewed by The Business Times in October last year – he believed back then that the prices of property stocks were completely out of line with the physical property market itself, and they presented a good arbitrage opportunity. Funnily enough, Wheelock's stock price fell to its lowest in a year in late October as well.

David Lawrence is known for being very shrewd in his property dealings, but investors might remember his apology to his shareholders last April for buying a 10% stake in SC Global. He paid S$6 a share, but SC Global is currently trading around S$0.50 nowadays.

Wheelock Properties' last available free cashflow figure from Reuters Knowledge is for FY2006. It was a negative S$553m. What is so shocking is that the company's free cashflow has been negative since FY2003. They were positive the years before that. We have to give Wheelock a cross here for its recurring negative free cashflow.

It got a score of 40 on the Business Times Corporate Transparency Index. It fails as its score is below 50. A cross here for Wheelock.

To recap, Wheelock gets only 2 ticks out of 5 for our Bottom Fishing report.

Analysts surveyed by Reuters have on average an OUTPERFORM call on the stock with a target price of S$1.51 as compared to its last traded price of S$1.00.

As always, please see your licensed financial advisor before making any investment decisions.

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