RHB initiates “buy” on Coliwoo amid rising expat, foreign student demand

[SINGAPORE] RHB has initiated coverage on co-living operator Coliwoo with a “buy” call, citing demand tailwinds for mainboard-listed company and profit growth forecasts.

On Thursday (Jan 15), the bank assigned Coliwoo a target price of S$0.82, a 41 per cent upside from its latest closing price of S$0.58 on Wednesday.

As part of a the fast-growing co-living sector, Coliwoo could benefit from demand tailwinds such as a rising number of international students, expatriates and tourist arrivals, alongside high home ownership costs for foreigners, said RHB analyst Vijay Natarajan.

“Co-living is a niche and fast growing segment in Singapore, driven by structural shifts such as the rising popularity of community living and hybrid work,” he said.

Similarly, CGSI and Maybank Research initiated coverage on Coliwoo with an “add” and “buy” call respectively, and both assigned it a S$0.74 target price.

The brokerages highlighted Coliwoo’s growth prospects and potential to ride on the co-living sector’s tailwinds.

CGSI analysts Tan Jie Hui and Lim Siew Khee said: “Singapore’s co-living sector appears to be in the midst of a structural upswing, and Coliwoo is well positioned to capitalise on the next phase of growth, supported by its scale, brand strength, and proven execution track record.”

Eric Ong, Maybank Research analyst, agreed that co-living has emerged as a “preferred option” for many young professionals and students due to its flexible lease terms, unique value prropositions and Singapore’s safe haven status as a regional business, medical and educational hub.

Coliwoo could record a net profit compound annual growth rate of around 30 per cent between FY2025 to FY2028, backed by organic and inorganic growth, as well as its ability to identify unique opportunities and its space optimisation track record, said Natarajan.

Converting legacy assets

RHB’s Natarajan said: “Coliwoo’s key strength lies in identifying and revitalising old, unused, and underutilised assets into co-living spaces.”

The company focuses on acquiring or leasing old, unused and underutilised properties and transforming them into “modern and trendy co-living spaces”, he said. These properties are managed and operated in-house under the Coliwoo brand or leased to third-party operators.

CGSI analysts similary highlighted Coliwoo’s ability to reposition well-located, lower-cost legacy buildings and shophouses by leveraging on its parent company LHN’s expertise.

“Coliwoo converts underperforming assets into higher yielding co-living and hospitality uses, thereby enhancing asset level returns post-stabilisation,” they said.

RHB’s Natarajan highlighted the “strategic locations” of the properties within Coliwoo’s portfolio, which comprises 25 of such assets as at FY2025.

This factor, alongside Coliwoo’s community living value proposition, contributes to high demand and “consistently high occupancy levels, said Ong.

“Its compact size and design ability from its long track record in space optimisation also sets it apart, resulting in its ability to charge higher rental per square feet and superior margins,” Natarajan said.

Asset-light growth strategy

RHB’s Natarajan highlighted Coliwoo’s pivot towards a more asset-light business model which is “highly scalable and less capital-intensive”.

To achieve its next leg of growth while considering balance sheet limitations, the company is pursuing an asset-light strategy through master lease agreements and management contracts, he said.

“By leasing properties en-bloc and converting them into co-living spaces, Coliwoo plans to grow its portfolio efficiently while maintaining a strong balance sheet.”

“Management contracts also allow it to enter long-term partnerships with landlords and developers to operate co-living spaces without owning the assets, reducing capital outlay and increasing financial flexibility,” he added.

Maybank Research’s Ong concurred that Coliwoo’s asset-light strategy could contribute to a potentially higher dividend payout than its guided 40 per cent of core profits.

As part of this strategy, Coliwoo has embarked on capital recycling efforts, such as its recent S$43.9 million sale-and-leaseback of its Pasir Panjang hotel.