Property Devt & Invt - CIMB Research 2017-03-15: Upbeat Feb

Property Developers & Inventories CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI

Property Devt & Invt - Upbeat Feb

Feb non-EC residential sales surged yoy and mom to 977 units.
Buoyant volume to remain on a slew of upcoming launches.
Maintain sector Overweight. Top picks are UOL, City Dev, Capitaland and Wing Tai.

Monthly primary private home sales surged yoy and qoq in Feb to 1,306 units (977 units excluding executive condominiums, i.e. ECs). This was led by the Outside Central Region (OCR) volume which made up 75% of non-EC sales. Popular projects included Parc Riviera (200 units sold) and The Clement Canopy (207 units sold).
Selected ongoing projects also saw slightly better take up on a mom basis. Rest of Central Region (RCR) sales accounted for another 22% of Feb volume.

Primary home sales for the first two months of 2017 totalled 1,359 units, 7% higher than a year ago.
Take up outpaced new launches of 658 units by a 2:1 ratio, as buying interest concentrated largely on improved sentiment and the quantum of affordability offered by smaller-sized units.

Market sentiment appears to have improved following the adjustment of the Sellers’ Stamp Duty from 11 Mar, although the impact would likely to be felt from the medium term. We expect at least three more new projects to be rolled out in 1H17.
Hence, we anticipate primary market volume transactions to remain fairly buoyant over the next few months. However, we think price recovery is likely to lag given the current elevated inventory and vacancy levels.

Property stocks are currently trading at 30% discount to RNAV on improved market newsflow and potential M&A activities. We think catalysts such as increased landbanking could emerge as the market continues to digest existing high inventory.
We maintain our Overweight stance with our top picks of UOL, City Dev, Capitaland and Wing Tai.
Downside risk to sector call includes higher than projected interest rate hike which would erode affordability and a slower than projected economic growth.

ADD, TP S$4.19, S$3.66 close
We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at 30% discount to RNAV.

ADD, TP S$10.51, S$10.31 close
Overseas and Singapore residential contributions to continue to underpin earnings growth. CIT’s active capital recycling and low gearing would enable the group to tap new investment opportunities.

ADD, TP S$7.96, S$6.87 close
UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at 31% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-03-15

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.190 Same 4.190

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