Property Devt & Invt - CIMB Research 2016-12-15: Sales continue to track higher yoy

Property Devt & Invt - CIMB Research 2016-12-15: Sales continue to track higher yoy CAPITALAND LIMITED C31.SI UOL GROUP LIMITED U14.SI CITY DEVELOPMENTS LIMITED C09.SI

Property Devt & Invt - Sales continue to track higher yoy

  • Nov and 11M16 residential sales higher yoy.
  • We expect prices to continue declining in 2017 on the back of supply and rental drag.
  • Concerns priced in, maintain Overweight. Top picks: UOL, City Dev, Capitaland.

RCR and OCR transactions continue to dominate

  • Total Nov primary home sales came in at 1,110 units, or 860 units excluding executive condominiums (ECs). Although lower vs. Oct, the sales performance was above the corresponding 2015 level by 17.5%/13.3%. The best-selling projects were Parc Riviera (128 units, ASP S$1,189psf) and Queen’s Peak (271 units, ASP S$1,628psf).
  • As a result, sales in the Rest of Central Region (RCR) and Outside Central Region (OCR) constituted 96% of sales while sales in the Core Central Region (CCR) made up a small 4%.

11M16 volume sales higher yoy

  • For 11M16, primary home sales totaled 11,851 units, 21% higher than a year ago.
  • Stripping out ECs, 7,996 units were transacted, 9% above last year’s level.
  • On an annualised basis, 2016 sales could be the highest since the implementation of the Total Debt Servicing Ratio (TDSR) framework in 2013, as the low interest rate environment and high savings rate of Singapore households led to property purchases.

High supply and soft rental a drag on outlook

  • Going into 2017, we expect interest rates, and hence mortgage rates, to inch up further and this is likely to erode buyers’ affordability. This and the declining, but still high, incoming new inventory will continue to be a drag on rental and price outlook, in our view. Hence, we expect private residential prices to continue declining by c.5% while volume sales remain about 8,000-9,000.

Stay Overweight; UOL, City Dev and Capitaland our top picks

  • Property stocks reacted negatively to the long-awaited US Fed interest rate hike and are currently trading at 40% discount to RNAV, or at the -1 s.d. level. However, we think much of the interest rate and oversupply concerns are priced.
  • In the absence of short-term catalysts, the sector could trade range bound.
  • We maintain our sector Overweight rating, with UOL, City Dev and Capitaland as our top picks. Downside risks to our call include rising unemployment.

Highlighted companies 


  • ADD, TP S$4.17, S$3.08 close 
  • We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at 40% discount to RNAV.

City Developments 

  • ADD, TP S$10.40, S$8.38 close 
  • We expect overseas contributions from China and UK 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$6.27 close 
  • UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at 37% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2016-12-15
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