We conducted an independent visit to Cityscape@Farrer Park yesterday and found that 61% (152 out of 250 total units) have been sold to date, up significantly from 22% sold as of end Jun 2012. After visually inspecting the construction site, we judged it likely that progressive recognition for Cityscape would begin in 2QFY13 and boost earnings (to be announced in mid Nov 2012) by an estimated $3.5m to S$4.5m. This would drive a substantial YoY increase over last year’s quarterly PATMI of S$5.2m. Since we have upgraded KSH to a Buy on 21 Sep 2012, its share price has appreciated 31%. We still see significant upside at current price levels , however, against our fair value estimate of S$0.50 (50% discount to RNAV). In particular, we see the upcoming results as a postitive near-term catalyst, while the company’s fundamentals continue to strengthen as sales conversions continue at a healthy pace across its property developments. Reiterate BUY as our key small-cap conviction idea. Cityscape boost likely in quarterly results ahead
Cityscape@Farrer Park, in which KSH has a 35% stake, is a key project for KSH - accounting for an estimated 53% (S$63.9m) of total gross profits for its existing development portfolio. We conducted an independent visit to the site yesterday and found that 61% (152 out of 250 total units) have been sold to date, up significantly from 22% sold as of end Jun 2012. Current price levels are just north of S$1.4k psf – marginally above our forecast - after management raised prices a month ago. From our channel checks, buyer interest for Cityscape appears to be firm with healthy show-flat attendances during weekends this despite recent property curbs limiting loan tenures. After visually inspecting the construction site, we judged it likely that progressive recognition for Cityscape would begin in 2QFY13 and boost earnings (to be announced in mid Nov 2012) by an estimated $3.5m to S$4.5m, driving a substantial YoY increase over last year’s quarterly PATMI of S$5.2m. This increased visibility of development earnings would likely be a positive share price catalyst ahead, in our view.

Strong launch at new project Sky Green
KSH’s newly launched project, Sky Green, also turned in a sterling performance with ~80% of units sold (140 out of 176 total units). Average price levels were around S$1.5k psf. KSH has a 25% stake in the 176-unit project located at MacPerson Road and we expect this project to contribute an estimated S$10.6m gross profit to the company. In our view, this performance re-affirms our thesis that management has a demonstrated ability to seek out and deploy capital into attractive real estate development projects and execute sharply on sales, alongside its joint venture partners.

Fundamentals continue to strengthen
Since we have upgraded KSH to a Buy on 21 Sep 2012, its share price has appreciated 31%. We still see significant upside at current price levels, however, against our fair value estimate of S$0.50 (50% discount to RNAV). In particular, we see the upcoming results as a postitive near-term catalyst, while the company’s fundamentals continue to strengthen as sales conversions continue at a healthy pace across its property developments. Reiterate BUY as our key small-cap conviction idea.