Far East Consortium to launch more residential properties

FEC believes the properties could fetch HKD 2.8 billion in revenue.

Here's more from DMG OSK:

We recently met with the management of Far East Consortium (FEC). We were impressed by the Group's strong residential development pipeline consisting of 10 projects in China, Australia and HK with a total GFA of 5.5m sq ft.

Having secured HKD4.4bn in presales as of end-March, FEC intends to launch further presales of residential properties with a total GFA of 481,000 sq ft in 2H3/13F which they believe could fetch c.HKD2.8bn in revenue.

FEC also operates hotels through its 73.25%-owned subsidiary Dorsett Hospitality (DH) (2266 HK, NR). In 1Q3/13F, the hotel segment saw an 8% increase y-o-y in RevPAR. FEC expects 4,894 rooms to become available by end-March 2013 and plans to add another 1,906 rooms by end-March 2014.

In our view, FEC appears attractive for its: i) 82% discount to the Group’s own NAV estimate of HKD8.71, ii) strong earnings growth outlook driven mainly by property development sales and iii) rising dividend yield (4.2% in FY3/12), since FEC has guided for a 30% payout ratio on reported earnings.