Singapore Property Development & Inventory - CIMB Research 2018-01-15: Robust Outlook

Singapore Property Stocks Property Developers UOL GROUP LIMITED U14.SI CITY DEVELOPMENTS LIMITED C09.SI

Singapore Property Developers & Inventories - Robust Outlook

December 2017 primary home sales volume rose 17% y-o-y despite the lack of sizeable new launches.
We project higher volume demand and private home prices to rise by up to 5% in 2018F.
Retain sector Overweight; top picks – UOL, City Dev.

Monthly primary home sales in Dec 2017 came in at 531 units, or 431 units excluding executive condominiums (ECs). The latter figure represents a 45% mom decline but 17% higher y-o-y. Nonetheless, it still represents a take up rate of 187%.
The pattern of take up continues to be dominated by suburban sales, making up 56% of total sales while those in the city fringe accounted for 35% of transactions. Projects that enjoyed higher sales during the month include Parc Botannia, Parc Riviera and Symphony Suites.

For the whole of 2017, cumulative ex-EC primary home sales came in at 11,562 units, 38% higher than a year ago, ahead of our expectation of 10,000 transactions for the year, as sentiment remained upbeat. Total private homes and EC sales amounted to 15,675 units, up 26% y-o-y.
Meanwhile, private home prices ticked up 0.7% qoq in 4Q17 and 1% y-o-y for 2017, even as HDB resale prices dipped 1.5% for the year.

Going into 2018, we anticipate primary home sales to improve y-o-y to 11,000-12,000 units, and private home prices to rise by up to 5% y-o-y. We expect displaced homeowners from enbloc sales and organic household formation to continue to underpin demand for housing.
We think developers would continue to replenish their land inventory, both from enbloc sales as well as from the government's land sale.

Property stocks are now trading at a c.33% discount to their RNAVs. We believe the sector will still outperform the STI given the nascent recovery in residential prices and improved market sentiment. Hence, we retain our Overweight sector call, with UOL and City Dev as our top picks.
Catalysts such as robust land restocking should continue to boost the RNAVs of developers, in our view.
Key risks include a faster-than-expected rise in mortgage rates, which could erode affordability.

Rating: ADD, Target Price S$13.15
City Dev’s land restocking activity should enable the group to continue to ride the residential up-cycle and underpin its RNAV expansion.
The stock is trading at a 21% discount to RNAV.

Rating: ADD, Target Price S$9.62
UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. It has good office exposure through UIC.
The stock is trading at a 23% discount to RNAV.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2018-01-15

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 9.620 Same 9.620

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