Singapore Property - Maybank Kim Eng Research 2016-09-15: A Quiet Month

Singapore Property WING TAI HLDGS LTD W05.SI HO BEE LAND LIMITED H13.SI CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI

Singapore Property - A Quiet Month

We reiterate our cautious stance on property developers. Aug16 home sales figures were not exciting, down 18% YoY to 805 units. With cooling measures remaining in place, we doubt home sales volumes can improve materially. This could continue to weigh on sentiment for the sector.

Furthermore, we believe development risks are higher for developers seeking to replenish landbank to sustain their business as land prices remain elevated. Therefore, we see limited scope for developer stocks to rerate despite inexpensive valuations.
We prefer CapitaLand for sector exposure.

Developers sold 805 homes in Aug16 (-18% YoY, -58% MoM). This comprises 473 private homes and 332 Executive Condominiums (EC). Even the top selling private residential projects Lake Grande, The Trilinq and The Glades sold just 35, 30 and 22 units respectively.
For developers under our coverage, only CityDev featured among the top selling projects with 15 units sold at The Brownstone, an EC project.

In the coming months, we believe the spotlight will be on the actions of developers that have significant unsold units for projects facing their respective ABSD deadlines.
Developers who bought residential land since its implementation in Dec 2011 were exempted from paying ABSD on land cost at the time of purchase. In order to qualify for the exemption, developers would need to complete and sell every single unit in the project within a five-year period. They will need to pay the exempted stamp duty if they fail to do so.
One of the first projects facing the ABSD deadline is The Trilinq by IOI Properties (Not Rated). 48% of this project remains unsold with just five months to its deadline in Jan 2017.
Other projects facing ABSD deadlines in 2017 are Mon Jervois (50% unsold, Feb 17) and Pollen & Bleu (88% unsold, Jun 17) by UIC (Not Rated), The Venue Residences (45% unsold, Sep 17) by CityDev (HOLD, TP SGD9.17) and The Crest (70% unsold, Sep 17) by a Wing Tai (HOLD, TP SGD1.71) JV.
While we have yet to see significant price cuts, there could be more pressure to do so as project deadlines near. This could lead to downwards pressure on prices if these developers choose to cut prices.

Separately, the URA will be using net prices for delicensed projects sold by developers to compute the property price index from Sep 2016.
Previously, the use of gross prices resulted in an upwards bias to the index. In particular, the pick-up in CCR prices in 1Q and 2Q of 0.3% QoQ may be attributed to the use of gross prices for several delicensed projects in the region.
In using gross prices, incentives offered by developers for projects, such as OUE Twin Peaks and Ardmore Three, were not captured. This change in methodology will better reflect the underlying prices of projects sold and should result in downwards pressure to the index in 4Q16, in our view.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-09-15

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.71 Same 1.71

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BUY Maintain BUY 3.93 Same 3.93

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