Singapore Property Developers & Inventories - CIMB Research 2018-03-15: Take-up Rates Remain Firm

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

Property Devt & Invt - Take-up Rates Remain Firm

February 2018 primary home sales volume slipped lower y-o-y but take-up rates remained firm at 2x.
We expect the pace of new launches to pick up in the coming months.
Maintain sector Overweight. Our top picks are UOL and City Developments.

Feb 2018 monthly primary home sales came in at 377 units (469 units including executive condominiums), 61% lower than a year ago and 28% below Jan 2018 transaction level. We think this was largely due to the lack of new launches amid the CNY lull.

In our view, a more meaningful comparison would be the take-up rate, which stood firm at 2x in Feb, indicating still-healthy buying interest in the residential market.

Rest of Central Region sales accounted for 45% of total ex-executive condominium sales in Feb, while Outside Central Region projects made up another 43%.
Projects that continue to see active transactions include Queen’s Peak, Kingsford Waterbay and Artra. The latest sales brought 2M18 home sales to 901 units.

Looking ahead, we anticipate the pace of new launches to pick up. We note that the Nim Collection landed project is being marketed now, while the 309-unit Margaret Ville and 861-unit The Tapestry are being sounded out for interest. We maintain our new launch expectation of 10,000 units for this year.
While cumulative sales in Jan-Feb 2018 accounts for c.10% of our full-year demand projection, we maintain our expectation for demand to reach 11,000-12,000 units in 2018F, as the rising pace of upcoming new launches could attract more buying interest in the market, amid an average 5% increase in private home prices.

We estimate Singapore-listed property stocks are currently trading at a 35% discount to RNAV. With anticipated newsflow on upcoming new launches in the sector, we believe there is room for share price outperformance by property stocks. Hence, we retain our Overweight sector call, with UOL and City Developments as our top picks.
Potential catalysts are continued land restocking and good take-up rates at new launches, which could continue to boost the share price performance of developers.
Key risks are faster-than-expected rise in mortgage rates, which could erode affordability.

In our view, CityDev’s land-restocking activity would enable the group to continue to ride the residential up-cycle and underpin its RNAV expansion, while growing its new fee income platform could bolster ROE in the medium term.
The stock is now trading at a 21% discount to RNAV.

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 now trading at a 27% discount to RNAV.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2018-03-15

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