CGS International Securities
July 9, 2025

LHN Ltd: Unlocking Value in Singapore’s Booming Space Optimisation Market

Introduction: A New Growth Chapter for LHN Ltd

LHN Ltd, a dynamic Singapore-based real estate management group, is rapidly emerging as a key player in space optimisation and facilities management across residential, industrial, and commercial segments. Renowned for its Coliwoo (co-living) and Work+Store (self-storage) brands, LHN is strategically positioned to leverage Singapore’s evolving property trends and robust demand for flexible space solutions.

Investment Summary: Strong Growth Prospects and Value Catalysts

• Initiation Rating: Add
• Target Price: S\$1.00 (31.6% upside from S\$0.76)
• Valuation Basis: 10x CY26F P/E (10-year mean), undemanding at 6.1x currently
• Key Catalysts: Coliwoo spin-off/IPO, industrial asset acquisitions, potential special dividends
• Broker Consensus: 3 Buy, 0 Hold, 0 Sell

Financial Highlights

LHN’s Business Model: Diversification and Operational Synergy

LHN operates across four major business segments:

• Space Optimisation: Asset management of residential (Coliwoo), industrial (Work+Store), and commercial (GreenHub) properties.
• Facilities Management: Cleaning, maintenance, and carpark management through subsidiaries.
• Property Development: Strategic acquisition and redevelopment of underperforming or well-located assets.
• Energy Resources: Solar installations, EV charging, and electricity retailing primarily for industrial clients.

In 1H25, Space Optimisation accounted for 54% of revenues, led by residential (34%) and industrial (18%). Facilities Management contributed 28%, and the newly launched Property Development segment delivered 17%, driven by strong sales at LHN Food Chain.

Coliwoo: Riding the Co-Living Boom

Coliwoo, LHN’s flagship co-living brand, is the group’s primary growth driver, contributing 56% of 1H25 PBT. The business has demonstrated robust growth, with operational keys rising at a CAGR of 47% from FY21-24. As of March 2025, Coliwoo managed 2,595 keys, with plans to double this to 5,145 keys by FY27 by acquiring 800 new keys annually.
Operational Resilience:

• Occupancy rates consistently above 95% (98% as at 1H25), even amid a weaker expat hiring environment.
• PBT margins of 29-44% over the past three years.
• Diversified and hybrid leasing model: 73% of keys under master leases/management contracts; remainder owned or JV.

Growth Outlook:

• FY26F PBT expected to rise 20%, FY27F PBT by 29% as new projects (Coliwoo Bugis, Coliwoo Resort Chalet, 50 Armenian Street) come online.
• FY27F: Coliwoo’s revenue forecast to grow 29% YoY with 720 new keys added (+25%).
• Portfolio occupancy for new properties conservatively forecast at 60% in the ramp-up phase.

Spin-off and IPO of Coliwoo: A Major Value Catalyst

LHN is preparing for a potential Coliwoo spin-off and IPO, which could unlock substantial shareholder value. Global co-living and hospitality peers trade at an average of 20x FY26F P/E. Even at a 50% discount (10x), Coliwoo is estimated to be worth at least S\$250 million. Post spin-off, LHN is expected to retain a 50% stake, generating at least S\$125 million in proceeds for opportunistic investments and capital returns.

Industrial Segment: High Margins with Work+Store

LHN’s industrial assets, primarily under the Work+Store brand, are highly profitable, with PBT margins of 62-78% (FY21-24). The segment benefits from:

• Hybrid leasing model and efficient cost structure.
• Strong and scalable demand, particularly from SMEs and e-commerce businesses.
• Recent upgrades to climate-controlled units (e.g., 202 Kallang Bahru, Ang Mo Kio) – rental yields estimated 30% above standard units with fast ramp-up to 60% occupancy.

Industrial revenue is expected to grow at 1-3% annually over FY25-27F, supported by price increases and unit upgrades, offset by softer manufacturing demand.

Property Development: A New Growth Engine

In 1H25, LHN recorded S\$12m from the sale of six units at LHN Food Chain. The remaining 43 units will be progressively sold through FY28F, supporting topline growth. The Geylang redevelopment project will further bolster future revenue.

• FY25F: 8 units sold (S\$16m revenue expected)
• FY26-27F: 12 units sold per year (S\$24m per annum)
• Gross margin expansion driven by property development contributions (FY25-27F: 57-59%)

Facilities Management: Consistent, Technology-Driven Growth

Facilities Management revenue is set to grow 11%/7%/7% over FY25-27F, supported by:

• Growth in cleaning contracts and new carparks managed (Singapore base, post-HK exit)
• Focus on smart parking solutions and technology-driven cleaning services
• Divestment of loss-making Hong Kong carpark business in 1H25

Energy Business: Steady Expansion in Renewables

Energy revenue, though small (1% of 1H25 revenue), surged 190% YoY in FY24. LHN is scaling solar capacity and EV charging points, projecting at least 30% annual revenue growth in this segment for FY25-27F.

Financial Performance: Earnings Growth and Capital Management

• Group EBIT expected to grow at a 19% CAGR (FY24-27F)
• Net gearing to remain high (103-115%) to support growth, with potential asset divestments to fund capex and working capital
• Dividend payout of S\$0.03 per share maintained for FY25-27F (at least 30% of recurring profit), with potential upside from special dividends post-Coliwoo IPO

Peer Comparison: Attractive Valuation Among Regional Leaders

LHN trades at a deep discount to global and regional peers, supporting a compelling value proposition.

Industry Outlook: Robust Tailwinds Across Segments

• Co-living Market: Rising private rental rates (+47% from 1Q21 to 1Q25) and government support for flexible accommodation are driving demand. Co-living offers affordability, flexible leases, and community features attractive to expats, students, and young professionals.
• Self-Storage: E-commerce growth (projected US\$33.3bn by 2028, CAGR 8.9%) is fueling demand, with occupancy at 82% and new supply unlocked in 2025. Climate-controlled storage is a fast-growing niche.
• Facilities Management: Post-pandemic hygiene awareness, government initiatives (SG Clean, PWM), and tech adoption drive sustained growth in cleaning and carpark management.
• Parking Management: COE quota increases (+21% YoY for May-Jul 2025) and urban expansion underpin market growth (CAGR 6.7% through 2031).

SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats

• Strengths: Diversified segments, flexible hybrid leasing, strong track record, 30% co-living market share.
• Weaknesses: Reliance on master leases (26 of 47 properties), limited geographical diversification.
• Opportunities: Coliwoo spin-off, regional expansion, new development projects.
• Threats: Intense competition, regulatory changes, economic downturns, asset acquisition constraints.

Risks and Mitigants

• Occupancy and Rental Rate Declines: Short-term leases require constant tenant inflow; economic weakness impacts expat demand.
• Fragmented and Competitive Market: Scale is critical as more operators enter.
• Lease Renewal and Asset Acquisition Risks: Heavy reliance on master leases and limited greenfield opportunities in Singapore.

Corporate Governance and Management

LHN boasts a seasoned leadership team led by Executive Chairman Kelvin Lim and Deputy Managing Director Jess Lim, supported by a robust independent board and experienced business heads in each segment.

ESG Initiatives and Sustainability

LHN is committed to ESG, with:

• Board-level Sustainability Innovation Committee overseeing initiatives.
• Solar capacity exceeding 1,200 kWp across 10 sites (FY24).
• Intensity targets set for emissions reduction by 2028.
• Improved customer satisfaction, staff training, and community engagement.

While ESG performance is not yet factored into valuations, ongoing improvements may enhance future investor appeal.

Conclusion: LHN’s Compelling Value Proposition

LHN Ltd is at an inflection point, poised to unlock substantial value via the Coliwoo spin-off and aggressive expansion in high-margin industrial and property development segments. Backed by a resilient hybrid operating model, robust balance sheet, and strategic management, LHN offers investors an attractive growth story with strong earnings visibility, stable dividends, and significant upside potential.

Recommendation

Add at S\$0.76, Target Price S\$1.00 (+31.6% upside). Re-rating catalysts include the Coliwoo spin-off, industrial asset acquisitions, and special dividends. Risks center on occupancy, lease renewals, and asset acquisition constraints, but are balanced by diversified operations and active capital recycling.

Appendix: LHN’s Business Segments at a Glance

• Residential: Coliwoo (Singapore, regional), 85 SOHO (China, Myanmar, Cambodia).
• Industrial: Work+Store (modular self-storage, e-commerce, SMEs, climate-controlled units).
• Commercial: GreenHub serviced offices, non-branded commercial assets in high-traffic locations.
• Facilities Management: Integrated cleaning, landscaping, carpark management (101 carparks, 27,000 lots).
• Energy: Solar, EV charging, electricity retailing.
• Property Development: Food Chain project (49 units), Geylang JV, capital recycling via sales and asset enhancement.