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Singapore Property - DBS Research 2018-03-23: Bukit Sembawang Is Back With A BANG!

Singapore Property - DBS Vickers 2018-03-23: Bukit Sembawang Is Back With A BANG! BUKIT SEMBAWANG ESTATES LTD B61.SI

Singapore Property - Bukit Sembawang Is Back With A BANG!

  • Bukit Sembawang tops bid for Makeway View Estate for S$168m, at its reserve price.
  • Reflects land rate of S$1,480 per square foot after accounting for assumed 10% balcony bonus; breakeven at S$2,000 per square foot.
  • Newton’s charm and location near popular schools is a strong selling point.



What's New

  • Bukit Sembawang announced that the group has won the tender for the en bloc of Makeway View Estate for S$168m, which is at the reserve price. This reflects a land rate ofS$1,626 per square foot per plot ratio (psf ppr), inclusive of development charges (DC) of S$21.26m.
  • The property is located across from the Newton Food Centre and is within 1 km of Anglo-Chinese School (Barker), Anglo-Chinese School (Junior) and St Joseph’s Institution Junior, which will be a key attraction for potential buyers. These are good schools with an international standing.
  • Current owners of the 28 apartments and 4 penthouses will receive between S$3.86m – S$10.74m. 
  • Details of the development:
    • Tenure: Freehold
    • Site Area: 3,863.1 square metre (sqm)
    • Allowable Gross Plot ratio: 2.8
    • Potential Gross Floor Area (GFA): 10,816.68 sqm or 116,430 square feet (sqft); 128,073 sqft with 10% bonus balcony
  • We estimate that a new development of up to 154 units (assuming an apartment size of 70 sqm) can be built on the site.


Our thoughts on this deal


Conviction on the Singapore recovery from an “old hand”. 

  • This is the second successful en bloc for the group after laying dormant for almost 10 years, a sign of developers’ overall confidence of the rebound in Singapore home prices in 2018-2019. 
  • Based on our estimates, the group will have committed close to S$600m of capital so far to acquire new land in Singapore (it topped the bid for Katong Park Towers for S$405m, inclusive of DC), which can be funded by internal sources and borrowings.

Estimated selling price at S$2,300 per square foot (psf) and above; break-even is closer to S$2,000 psf. 

  • Based on our estimates, assuming a 10% balcony bonus, the land rate can be lowered to S$1,480 psf, implying that breakeven is close to S$2,000 psf and launch prices at S$2,300 psf and above. This will imply a total potential Gross Development Value of S$294m for the project, implying that the average price quantum per unit is closer to S$1.9m.

Newton’s charm? 

  • Transactions in the vicinity while transacting at a wide range from S$1,400 psf-S$1,800 psf, easily cross $1.8m and often S$2.0m. 
  • We believe that the Newton/Novena area has its own charm and the location is attractive for many home-owners looking to re-locate closer to town and in the vicinity of good schools - Anglo-Chinese School (Barker), Anglo-Chinese School (Junior) and St Joseph Institution Junior - which will be a key attraction for potential buyers.

The window for developers to launch is still open but when will this cycle end? 

  • We still see a window of opportunity in the next 6-9 months for developers to launch their projects. With proceeds from over 40 en blocs to date, households have the capacity and pockets to buy a replacement home/investment property which will drive transaction volumes in the near term. 
  • We however are turning cautious given the supply of new units in the pipeline which now tops 30,000 units, of which more than half will be launched in 2019 onwards. With more home choices, we expect home-owners to be more discerning in their purchasing decisions. 
  • While Bukit Sembawang appears to have been successful in their land bids more than a year from the start of the current cycle, we note that this development is fairly small, thus mitigating its exposure.






Derek TAN DBS Vickers | Rachel TAN DBS Vickers | http://www.dbsvickers.com/ 2018-03-23
DBS Vickers SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998



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