Property Developers & Inventories - CIMB Research 2017-06-15: Taking A Small Breather

Property Devt & Invt - CIMB Research 2017-06-15: Taking A Small Breather Property Developers Property Inventories CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI FRASERS CENTREPOINT LIMITED TQ5.SI

Property Devt & Invt - Taking A Small Breather

  • Slower May volume on absence of new launches, ongoing projects seeing more traction.
  • Developers continue to increase inventory ahead of sector recovery.
  • Maintain Overweight; UOL, City Dev, FCL and Capitaland remain top picks.

Slower May volumes on lack of new launches

  • May home sales came in at 1,394 units, of which 370 units were executive condominiums (ECs). This headline number was 28% lower mom but unchanged from a year ago. 
  • Stripping out ECs, sales would have dipped 34% mom and 3% yoy. The slower May transactions are not surprising given the strong sales in Mar and Apr. 
  • With few new project launches, volume sales were 3x the number of new units marketed.

Ongoing projects seeing more buying traction

  • Ongoing projects that generated good sales volume include Parc Riviera, The Santorini, Commonwealth Towers and Sims Urban Oasis
  • Outside Central Region (OCR) sales accounted for 60% of non-EC take up while city fringe projects in the Rest of Central Region (RCR) made up 33%, with the balance from core central areas.

Volume transactions to remain brisk

  • Total ex-EC sales to May totalled 5,723 units, making up 50-60% of our full-year volume projection and was 75% higher than the transaction volume over the same period last year. 
  • We anticipate volume transactions to remain brisk for the remainder of this year with improved market sentiment post the adjustment of Sellers’ Stamp Duty in Mar.

Buoyant restocking activity

  • With low inventory levels, developers have been actively restocking, through government land tenders and enbloc transactions. 
  • We estimate that S$1.4bn worth of residential enbloc deals have been done year to date and anticipate more projects to be similarly monetised. 
  • We believe there is also a possibility for increased land offerings in the 2H17 government land sale programme for developers to restock.

Anticipate residential price recovery from next year

  • That said, residential prices have yet to recover as average prices continue to slip 0.3% since end-2016. The rental market remains weak and vacancy in the private market remains above 8%. 
  • With the Singapore economy projected (by the private sector economists) to grow at consensus c.2.5% this year and given the slower wage expansion, we anticipate a more gradual price recovery, from next year.

Stay Overweight

  • Property stocks are trading a c.28% discount to RNAV, midway between the long-term average and -1 s.d. discount to mean. 
  • We think catalysts such as increased land banking would continue to boost RNAV and share prices as developers continue to restock. Hence, we maintain our sector Overweight call. 
  • We continue to favour UOL, City Dev, FCL and Capitaland as our top picks.
  • Key risks include faster-than-expected rise in interest and mortgage rates, which would erode affordability.

Highlighted companies 


  • ADD, TP S$4.19, S$3.60 close 
  • We like CAPL for its ROE-boosting capital recycling activities. The stock is trading at 32% discount to RNAV.

City Developments 

  • ADD, TP S$11.63, S$10.70 close 
  • Overseas and Singapore residential earnings to continue to underpin near-term growth. CIT’s active capital recycling, low gearing and resumption of land bank restocking activity should underpin RNAV expansion, in our view.

UOL Group 

  • ADD, TP S$7.96, S$7.61 close 
  • UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. The stock is trading at 24% discount to RNAV.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | 2017-06-15
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.190 Same 4.190
ADD Maintain ADD 11.630 Same 11.630
ADD Maintain ADD 7.960 Same 7.960
ADD Maintain ADD 2.050 Same 2.050