Singapore Property - DBS Research 2017-06-14: The Resurrection Of Bidadari Estate

Singapore Property - DBS Vickers 2017-06-14: The Resurrection Of Bidadari Estate Singapore Property Sector Bidadari Estate Land Site Tender SINGAPORE PRESS HLDGS LTD T39.SI SPH REIT SK6U.SI UOL GROUP LIMITED U14.SI

Singapore Property - The Resurrection Of Bidadari Estate

  • Entities of SPH and Kajima Development came in tops in latest tender for land site at Upper Serangoon Road.
  • Rare mixed-use development at the new Bidadari Estate to the focal point of the new estate.
  • Seletar Mall could be injected into SPH REIT as the group’s capital commitments increase.
  • UOL Group could potentially see higher margins at Raintree Gardens site.



What’s New 


SPH comes in tops at Upper Serangoon Land tender.

  • SPH and Kajima Development through their subsidiaries, Elara 1 Pte. Ltd. And Callisto 1 Pte. Ltd, has emerged as the top bidder for a leasehold mixed development at Upper Serangoon Road, Woodleigh at a price of S$1.132bn. 
  • The price is 1.2% above the second highest bid, submitted by a JV between Far East Civil Engineering and Sekisui House Ltd. There were a total of 12 bids submitted, including the winning bid.
  • The site is just adjacent to the current Woodleigh MRT station which is the North-East Line. The site area is 273,842 sq ft with a maximum gross floor area (GFA) 958,450 sq ft. This implies a price of S$1,181 psf GFA. 
  • According to the tender details, close to 825 residential units can be built on the site.


Our Views 


A good showing among developers. Strong bids for quality sites. 

  • We believe that the strong showing by developers in the land tender continued to show that developers remain keen to add new stock in Singapore and this particular land site, in our view offers good potential for the developer. 
  • We note that for the developers that have put a bid for the land site, most are familiar with the Singapore market and there were minimal participation among new foreign developer entrants. The highest bid by SPH is also one of the tightest that we have seen in recent times – at only 1.2% higher than the 2nd bidder.
  • The next tender closing nearby will be at Woodleigh land, just across this land tender, which will close on 11 July 2017 and we believe that interest level at this site will also remain high.

Estimated GDV of close to S$1.6bn; residential estimated breakeven price at close to S$1,500 psf. 

  • We understand that the developer of the site will have to set aside a maximum of 150k sq ft (GFA) for retail use and 88k sq ft to build a neighbourhood police centre and community club, implying this location will be the focal community point in the future.
  • Assuming a valuation of S$3k psf for the retail component (150k sqft), we estimate that the breakeven for the residential units will be close to S$1,500 psf and potential launch prices to be north of S$1,650psf, assuming a 10% margin, setting a new record for the sub-market. 
  • The total gross development value (GDV) for this site is estimated to be close to S$1.63bn.


Potential to build a new “Junction 8” at Woodleigh.


Chance to build a mall catering to future of Singapore. 

  • The rare characteristic of a mixed-use development sitting on top of Woodleigh MRT station will spearhead the resurrection of the former cemetery site at Bidadari Estate. This mall, in our view, could represent the new “Junction 8” at Woodleigh MRT station.
  • We are positive on the potential of this development as it is located right smack at Bidadari Estate, which according to government’s masterplan, is one of the new estates that will be built over time. It is estimated that close to 11,000 new public housing units are projected to be built over the medium term. This implies a strong catchment for potential retailers looking to set up shop there and it means that the future mall will likely be positioned as a convenience stop catering to residents living within the vicinity. 
  • SPH has a track record in building a mall with similar characteristics.


Impact on SPH (HOLD, Target Price S$3.39) 


Not new in its drive towards diversification from its traditional media business. 

  • SPH’s interest and win does not surprise us given its desire to diversify out of its traditional media business. In addition, the property business is an area in which the group has already an exposure to. 
  • Note that SPH has also diversified into elderly nursing care with its purchase of Orange Valley Healthcare for S$164m earlier in April 2017.

First mixed commercial development but 4th retail mall.

  • While this will mark the first mixed commercial development by SPH, this will be the fourth retail mall development by the group, after Paragon, Clementi Mall and Seletar Mall. 
  • In terms of residential development, SPH has also development a residential development, Sky@Eleven, back in 2007. In addition, the retail mall could also provide an acquisition pipeline for SPH REIT, with SPH being the sponsor.

Likely to be funded via internal resources and debt. 

  • Given its strong balance sheet, we believe SPH will likely fund the land acquisition via bank loans and internal resources. 
  • As of quarter ending Feb 2017, SPH had about S$800m in cash and investments. Furthermore, we believe SPH could likely be looking to diversify its 70%-owned Seletar Mall to SPH REIT soon. The latest valuation for Seletar Mall is S$500m, of which SPH has a 70% stake.

No impact to our current DPS forecasts, maintain HOLD, TP: S$3.39. 

  • SPH will continue to maintain its DPS but with a downward bias given the challenges confronting its print business in our view. We are projecting 18 Scts DPS for FY17F, followed by a marginal dip to 17 Scts in FY18F.
  • Upside risks to our recommendation could be the divestment of its investment such as M1, which translates into 17.4 Scts per share for SPH given its 13.4% stake (at the current market of M1's share price at S$2.24).


Impact on SPH REIT (BUY, Target Price S$1.04) 


Seletar Mall could be injected to the REIT. 

  • With SPH putting capital commitments for this particular tender, we believe that the potential sale of Seletar Mall could be near. 
  • In our previous report, we envisioned that the purchase of Seletar Mall to be beneficial to the REIT as it offers upside to rentals given that the mall is entering its first reversionary cycle.


Impact on UOL (BUY, Target Price S$8.73) 


UOL could benefit for landbanking early. 

  • Once again, UOL stands to benefit from being an early believer of a potential turn in the property sector by being one of the first developers to replenish its landbank. 
  • While the Raintree Gardens site may be slightly further away from the Potong Pasir MRT station compared to this land site, the higher land price for this tender (+53%) would mean that the potential launch of the developments at Woodleigh will bode well for the pricing of the new Raintree Gardens’. Raintree Gardens’ estimated launch price at 10% margin is S$1,300psf vs Upper Serangoon’s estimated launch price of S$1,650psf.




Rachel TAN DBS Vickers | Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | http://www.dbsvickers.com/ 2017-06-14
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 3.390 Same 3.390
BUY Maintain BUY 1.040 Same 1.040
BUY Maintain BUY 8.730 Same 8.730



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