Property Devt & Invt - CIMB Research 2016-11-15: Surge in October home sales

Property Devt & Invt - CIMB Research 2016-11-15: Surge in October home sales CAPITALAND LIMITED C31.SI UOL GROUP LIMITED U14.SI CITY DEVELOPMENTS LIMITED C09.SI

Property Devt & Invt - Surge in October home sales

  • Oct’s monthly sales surged by more than two-fold mom, led by two OCR projects
  • Overall volumes have stabilised, but the price outlook continues to be clouded by high inventory levels and a weak rental market
  • Maintain Overweight; our top picks remain UOL, City Dev and Capitaland. 

Surge in Oct sales

  • Oct’s monthly home sales more than doubled mom and yoy to 1,252 units (1,540 incl. ECs), led by suburban transactions, which accounted for 83% of sales. 
  • Projects that garnered brisk take-up included Forest Woods and The Alps Residence, making up two thirds of OCR sales. City fringe projects generated 12% of sales, while projects in the CCR accounted for a small 5% of sales.

Sales volumes stabilising

  • The good take-up in Oct was due to project-specific positives, such as location of Forest Woods in the popular Lorong Lew Lian in Serangoon. This brings the 10M cumulative sales to 7,135 units (ex- ECs), or 9% higher yoy, underpinning our view that the physical market has reached a post-credit and policy tightening volume equilibrium.

High inventory levels and weak rental market drag

  • However, we think it is still too early to expect a price recovery at this point, due to high incoming supply of 14,578 units in 2017F, which could drag down island-wide occupancy rates. 
  • The 3Q16 URA property price index showed a steeper decline of 1.5% qoq, while rents have continued to slide by another 1.2% qoq. We think this will continue to put pressure on investment demand.

Top picks – UOL, City Dev, Capitaland; stay Overweight

  • Following the recent stock market declines on fears of an interest rate hike, developer stocks are currently trading at a 42% discount to RNAV and at 0.67x P/BV
  • We think much of the negative newsflow has been priced in. However, in the absence of any short-term property price catalysts, we think the sector could trade range bound for now. 
  • We stay Overweight, with UOL, City Dev and Capitaland as our top picks.
  • Downside risks include an interest rate hike, which would erode affordability, and a rising unemployment rate due to the cloudy macroeconomic conditions.

Highlighted companies 


  • ADD, TP S$4.17, S$3.00 close 
  • We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at a 42% discount to RNAV.

City Developments 

  • ADD, TP S$10.40, S$8.40 close 
  • Overseas contributions from China and UK are expected to ramp up from 2HFY16 and spur earnings growth. In addition, CIT’s active capital recycling and low gearing would enable the group to tap new investment opportunities.

UOL Group 

  • ADD, TP S$7.96, S$5.60 close 
  • UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at a 44% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2016-11-15
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 10.40 Same 10.40
ADD Maintain ADD 4.17 Same 4.17
ADD Maintain ADD 7.96 Same 7.96