Property Developers & Inventories - CIMB Research 2017-04-17: Strong Showing in March

Property Devt & Invt - CIMB Research 2017-04-17: Strong showing in Mar Property Sector Outlook Property Developer Stocks CAPITALAND LIMITED C31.SI UOL GROUP LIMITED U14.SI FRASERS CENTREPOINT LIMITED TQ5.SI

Property Devt & Invt - Strong showing in Mar

  • Mar 17 primary home sales doubled from Mar 16.
  • We expect more inventory restocking activity on improved market sentiment.
  • Maintain sector Overweight. Top picks are UOL, Capitaland and FCL.

Brisk developer sales in Mar

  • A total of 1,780 private homes (2,358 including Executive Condos) were transacted in the primary market in Mar, which is 82% higher mom and >2x Mar 16 volumes. The good showing was due to good take-up at new launches as well as progressive sales at selected ongoing projects.
  • The two best-selling projects were Grandeur Park Residences (484 units) and Park Place Residences (217 units). As a result, developments in the city fringe and suburban regions made up 96% of private home sales during the month.

Highest monthly sales since mid-2013

  • Mar monthly sales were the highest since mid-2013 and brings the YTD sales to 3,141 homes (4,232 including Executive Condos), more than double from last year.
  • We anticipate volume transactions to remain brisk with the improved market sentiment post the adjustment of the Sellers’ Stamp Duty on 11 Mar, although the actual impact would likely be felt in the medium term.

Expect more restocking activity

  • For the rest of 2017, we anticipate transaction volumes to remain buoyant. With low inventory positions, we expect developers to be more actively restocking and triggering land parcels from the government land sale programme such as Stirling Road site (from reserve list) and Toh Tuck Road parcel (won by SP Setia).
  • However, with ample new completions coming into the market, we expect prices to remain sluggish in the near term.

Stay overweight; UOL, Capitaland and FCL are our top picks

  • Property stocks are trading at c.29% discount to RNAV. At present, much of the negative newsflow on oversupply has been priced in. We think catalysts such as increased landbanking could emerge and boost RNAVs. Hence, we maintain our Overweight call. 
  • In terms of stock picks, we continue to like UOL and Capitaland and also move FCL up our top sector pick list.
  • Key risks to our view include a faster than expected rise in interest, and mortgage rates, which would erode affordability.

Highlighted companies 


  • ADD, TP S$4.19, S$3.68 close 
  • We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at 30% discount to RNAV.

Frasers Centrepoint Ltd 

  • ADD, TP S$2.02, S$1.79 close 
  • We like FCL for its diversified business model, underpinned by strong recurring earnings. The stock is trading at 38% discount to RNAV and offers a 4.8% dividend yield.

UOL Group 

  • ADD, TP S$7.96, S$7.05 close 
  • UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at 29% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-04-17
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.190 Same 4.190
ADD Maintain ADD 7.960 Same 7.960
ADD Maintain ADD 2.020 Same 2.020