Property Devt & Invt - CIMB Research 2017-08-22: More Collective Sales On The Cards

Property Devt & Invt - CIMB Research 2017-08-22: More Collective Sales On The Cards Property Developers CAPITALAND LIMITED C31.SI CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI WING TAI HLDGS LTD W05.SI

Property Devt & Invt - More Collective Sales On The Cards

  • Normanton Park’s collective sale will be closely watched.
  • Site could yield 1,290 new units, with an estimated breakeven cost of c.$1,300psf.
  • Maintain overweight on developers; top picks: UOL, Capitaland, City Dev, Wing Tai.

Normanton Park put up for collective sale

  • According to Business Times, Normanton Park (NP) has been put up for a collective sale with a reserve price of S$800m (link). 
  • Located near Science Park and Kent Ridge, NP is a privatised housing estate originally built in 1977 on a 660,999 sq ft land parcel. It currently contains 488 apartments which can be rebuilt to potentially house 1,290 homes of an average 100 sqm floor area each. This will be the second attempt to sell NP since its failed first bid in 2015.

Closely watched if bids could exceed asking price

  • In addition to the land price, there is additional payment to maximise the permissible floor area and to top up the remaining land tenure to 99 years. 
  • In all, we estimate the total cost to be S$898psf, based on the maximum GFA of 1,388,099 sq ft and assuming a tender price of S$800m. This transaction is likely to be closely watched to see if incoming bids would surpass the reserve price.

Site could yield 1,290 units

  • This will be the 11th site put into the enbloc market this year, and the second largest, in terms of value, to date this year, after the recently closed Tampines Court enbloc deal. The tender is expected to close on 5 Oct. Based on the above land price, we estimate a breakeven cost of c.S$1,300 psf. 
  • While there are no nearby new developments, the recent launch of The Clement Canopy in the Clementi area achieved a latest median price of S$1,400 psf.

Developers continue to restock low land inventory

  • The enbloc market is likely to remain buoyant as developers continue to restock their low land inventory. More importantly, replacement costs have risen as land bids appear to be reflecting some expectation of forward growth in end-product pricing.
  • With such strong appetite for land, we believe there is a possibility for increased land offerings in the 2H17 government land sale programme.

Maintain Overweight

  • We retain our Overweight stance on Singapore developers. Property stocks have performed well YTD and are currently trading at c.30% discount to RNAV. 
  • We continue to favour UOL, Capitaland, City Dev and Wing Tai as our top picks. 
  • Key risks include a faster-than-expected increase in mortgage rates or slower-than-projected economic growth.

Highlighted Companies 

CapitaLand ADD, TP S$4.21

  • We like CAPL for its ROE-boosting capital recycling activities. 
  • The stock is trading at 29% discount to RNAV.

City Developments ADD, TP S$12.54

  • Singapore and overseas residential earnings continue to underpin near term growth. 
  • CIT’s low gearing of 0.16x and resumption of landbank restocking activity should underpin RNAV expansion, in our view.

UOL Group ADD, TP S$9.03

  • UOL has a high recurring income base, supported by rentals, hotel operations and investment holdings. It has good office exposure through its associate UIC. 
  • The stock is trading at a 28% discount to RNAV.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-08-22
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.210 Same 4.210
ADD Maintain ADD 12.540 Same 12.540
ADD Maintain ADD 9.030 Same 9.030
ADD Maintain ADD 2.050 Same 2.050