CITY DEVELOPMENTS LIMITED
C09.SI
CAPITALAND LIMITED
C31.SI
UOL GROUP LIMITED
U14.SI
Property Development & Inventory - Rebound in Mar sales
- Rebound in Mar primary homes sales to the highest since mid-2015, points to some volume stabilisation in the market.
- But homes prices likely to continue contracting on high incoming supply and rising drag from QC and ABSD penalties.
- Still selective stock picking: in our order of top picks, City Dev, UOL and Capitaland.
A rebound…
- Mar monthly private home sales rebounded to 1,328 units (834 ex-Executive Condos). The latter is 37% higher yoy and up 175% mom.
- Notable projects seeing buying activity include Capitaland’s Cairnhill Nine (177 units sold at S$2,441psf) as well as The Wisteria (125 units sold at S$1,112psf).
- Other projects with sales movement include Botanique at Bartley, Kingsford Hillview Peak and The Poiz Residences.
….but not broad-based
- Although take-up rate still exceed new launches by 1.2x, activity still does not show a broad-based recovery.
- The latest figures translate to 1Q primary home sales (excluding ECs) sales of 1,470 units, 6.6% higher than a year ago, indicating some stabilisation in the market.
- The bulk of sales are still concentrated in the Outside Central Region.
Maintain our expectation for 8,000-9000 sales volume in 2016
- We maintain our projections for 8,000-9,000 units of primary homes sales for 2016, back in tandem with the long term average. However, we anticipate prices to continue retracing by 5-8% on the back of peaking housing completions.
- There are 26,467 and 17,234 private homes and ECs scheduled to be completed in 2016-17. This will drag on occupancy levels and consequently residential prices.
Drag on prices from rising penalties
- The slowing residential market and rising unsold inventory have raised concerns over the impact of Qualifying Certificate and Additional Buyers’ Stamp Duty penalties for developers with unsold inventories beyond a certain time limit.
- These penalties are set to gather momentum from 2017 onwards. Hence, we anticipate that selected projects may see a higher drag on prices as developers start to clear these inventories.
Stay Overweight with selective stock picking
- Developer stocks have rebounded from the recent low and are trading at 40% discount to RNAV, at the -1 s.d. historical discount to mean, with much of the negative newsflow in the stock price.
- With no policy reversal in sight, we think property stocks would stay range bound in the near term. We prefer stocks with strong earnings visibility and attractive valuations.
- Our top picks are City Dev, UOL, Capitaland.
Highlighted companies
CapitaLand ADD, TP S$4.05, S$3.13 close
- We like CAPL for its ROE-boosting capital recycling activities.
- The stock trades at a steep 38% discount to RNAV.
City Developments ADD, TP S$10.32, S$8.70 close
- CIT’s valuations are attractive, at 0.87x P/BV and a low net gearing of 0.28x.
- Potential near term catalyst could materialise when its overseas contributions ramp up, which would remove concerns over execution ability.
UOL Group ADD, TP S$8.26, S$5.94 close
- UOL has high recurring income, underpinned by rentals, hotels and investment income. This provides a sturdy recurring income base.
- The stock now trades at a 28% discount to our target price.
LOCK Mun Yee
CIMB Securities
|
Yeo Zhi Bin
CIMB Securities
|
http://research.itradecimb.com/
2016-04-18
CIMB Securities
SGX Stock
Analyst Report
10.32
Same
10.32
4.05
Same
4.05
8.26
Same
8.26
