Maybank Research Pte Ltd

May 16, 2025

LHN Ltd (LHN SP): Steady Delivery, Maintain BUY

1H25 Results Overview

LHN’s 1HFY25 core net profit, excluding non-recurring items, reached SGD15.4m, aligning closely with expectations and representing approximately 47% of the full-year forecast. This performance was primarily fueled by contributions from the Space Optimisation and Property Development segments. As anticipated, the group has declared an interim DPS of 1.0 cents, consistent with its dividend payout ratio (DPR) policy of distributing at least 30% of adjusted earnings. The FY25-27E estimates remain unchanged, with a maintained BUY rating and a target price (TP) of SGD0.55, still pegged to an undemanding 7x forward P/E. [[1]]

Co-Living Business: A Key Growth Driver

In the first half, overall revenue experienced a robust 29.4% YoY increase, reaching SGD70.6m. Segmentally, turnover from the Space Optimisation Business grew by 6% YoY to SGD38.1m. This growth was primarily driven by stronger top-line contributions from co-living properties (+15.1% YoY), partially offset by a decrease from commercial properties (-47.1% YoY). LHN recently launched its new co-living hotel, Coliwoo Hotel Kampong Glam at 48 Arab Street, and secured the master lease tender for a state-owned property at 159 Jalan Loyang Besar. [[1]]

Its Coliwoo projects at 453 Balestier Road (34 keys) and 260 Upper Bukit Timah Rd (62 keys) are also likely to be operational by 3QFY25. [[2]]

Contribution from Property Development Business

LHN recorded its maiden revenue of SGD12.1m from the sale of certain strata titled units at its nine-storey food factory at 55 Tuas South Avenue 1 during 1H25, achieving an adjusted PBT of SGD1.4m. Similar income contribution is expected in the 2H as well. The Facilities Management Segment saw improvement after securing new integrated facilities management contracts and car park management projects, along with the complete exit of its loss-making business in Hong Kong in end-Apr’25. [[2]]

Proposed Spin-Off: A Potential Re-Rating Catalyst

Management remains cautiously optimistic about the demand for short-term lodging in Singapore, which should continue to support stable rental and occupancy rates (1HFY25: 97.7%) for the remainder of 2025. LHN has proposed to spin off its co-living business, pending shareholder and regulatory approvals. The group intends to retain a majority stake in Coliwoo upon completion of the internal restructuring and will continue to consolidate its financials post-listing. [[2]]-[[3]]

Investment Summary

• Share Price: SGD 0.50 [[4]]
• 12m Price Target: SGD 0.55 (+11%) [[4]]
• Previous Price Target: SGD 0.55 [[4]]
• Rating: BUY [[4]]

Company Description

LHN Ltd. operates in four segments: space optimization, property development, facilities management, and energy. [[4]]

Key Statistics

• 52w high/low (SGD): 0.55/0.32 [[4]]
• 3m avg turnover (USDm): 0.4 [[4]]
• Free float (%): 38.0 [[4]]
• Issued shares (m): 418 [[4]]
• Market capitalisation: SGD207.0M/USD159M [[4]]

Major Shareholders

• LIM FAMILY /LHN: 54.6% [[4]]
• TEO ZHIWEI JUSTIN: 4.2% [[4]]
• LIM BEE CHOO: 1.0% [[4]]

Price Performance

The following table shows the price performance of LHN Ltd. relative to the Straits Times Index: [[4]]

• -1M Absolute (%): 18, Relative to index (%): 10 [[4]]
• -3M Absolute (%): (7), Relative to index (%): (6) [[4]]
• -12M Absolute (%): 48, Relative to index (%): 26 [[4]]

Financial Highlights

The following table summarizes the key financials for FY23A to FY27E: [[4]]

Value Proposition

• LHN’s co-living brand, Coliwoo, is the largest operator in Singapore by number of keys. [[3]]
• After rapid expansion since 2019, Coliwoo is operating at 13 locations and preparing to launch three more assets. [[3]]
• New dividend policy of a minimum 30% payout ratio. [[3]]
• FY25E P/E of less than 7x is undemanding compared to global hospitality peers. [[3]]
• Potential divestments are supported by a portfolio of assets that are in the money, and LHN is tilting towards an asset-light strategy. [[3]]

Financial Metrics

• Revenue growth in FY24 boosted by co-living business in Singapore. Further growth is expected, led by co-living as more assets in the pipeline become operational. [[3]]-[[4]]
• Contribution from space optimisation business grew steadily, making up 50% of LHN’s 1H24 revenue. [[4]]
• Gearing is likely to remain stable as LHN intends to expand via JVs and an asset-light strategy. [[4]]

Swing Factors

Upside:

• Better-than-expected rental fees and occupancy. [[4]]
• Prolonged lack of supply of new hotels / co-living rooms in Coliwoo’s key locations. [[4]]
• Sports events and entertainment create surge in ad hoc demand from travelers. [[4]]
• Potential disposal of business segment. [[4]]
• Value-unlocking divestments that lead to special dividend for shareholders. [[4]]

Downside:

• Delay in pipeline. [[4]]
• Surge in supply of key locations. [[4]]
• Failure to renew lease for master-leased assets. [[4]]
• Elevated interest rates until next re-financing in FY24. [[4]]

ESG Overview

Business Model & Industry Issues

• LHN strives to be a sustainable player in the real estate management services market, focusing on reducing its contribution to climate change. [[4]]
• LHN is positioned favorably among its peers in its efforts to reduce climate change and provide sustainable opportunities to its employees. [[4]]
• The rising property prices and a competitive industry in the co-living segment may lead to higher acquisition costs, requiring consistently good occupancy levels. LHN’s capital recycling model and revaluation strategies can help reduce their gearing. [[4]]
• Increased consumption of energy and water in space optimization may impact long-term ESG goals, but proactive efforts in sustainable practices should eventually offset this challenge. [[4]]

Material E (Environmental) Issues

• Energy efficiency is a priority in its Space Optimisation Business, with the use of energy-efficient electrical fittings/equipment, including energy-saving light bulbs, air-conditioning systems, and appliances equipped with advanced technologies such as motion sensors & timer switches. [[4]]-[[5]]
• Water-saving taps have been installed for 100% of its properties managed, but more needs to be done to achieve its water consumption intensity target of a 5% reduction. [[5]]
• In FY24, the group broadened its energy portfolio, and its total solar energy capacity reached approximately 8.8 megawatts (MW) with 44 main energy contracts. [[5]]
• In its facilities management services, LHN uses eco-friendly chemicals and cleaning agents to mitigate health and environmental risks. [[5]]

Key G (Governance) Metrics and Issues

• The board has 5 directors, including the Executive Chairman and Deputy Managing Director, with the remaining 3 being independent non-executive directors. [[5]]
• The remuneration and audit committees are chaired by independent directors. [[5]]
• The Board actively shapes its sustainability strategy, setting objectives, reviewing policies, and monitoring performance, with a focus on climate-related risks and opportunities. [[5]]
• Executive Chairman Mr. Kelvin Lim is the brother of the Deputy Managing Director Ms. Jess Lim. Together, they hold about 55.55% stake in the listco. [[6]]
• There were no cases of non-compliance with corruption-related laws and regulations in its operations in Singapore. [[6]]
• LHN has a code of corporate governance that includes Anti-Corruption, Anti-Fraud, and whistle-blowing policies, adhering to local government laws and regulations, resulting in zero incidents of corruption. [[6]]
• LHN has not received any substantiated complaints or identified leaks, thefts, or losses of customer data and has displayed a good cybersecurity track record and framework. [[6]]

Material S (Social) Issues

• Each employee received approximately 23 training hours in FY24, due to increased training programs. [[6]]
• Gender diversity is fairly high, with a 60:40 ratio in FY24, and 25% of total employees are aged above 50. [[6]]-[[7]]
• In FY24, LHN organized and participated in seven CSR programs and two charity walks, contributing over 400 volunteering hours. [[7]]
• Every supplier must declare their dedication to upholding key social standards, including fair employment practices, anti-discrimination policies, and the strict prohibition of child and forced labor. [[7]]

Key Financials

The following table presents key financial metrics and forecasts:

Key Ratios and Growth Analysis

The following table outlines the key ratios and growth analysis for LHN Ltd: