Property Development & Inventory - CGS-CIMB Research 2018-06-18: Uptick In May 2018 Home Sales

Property Development & Inventory - CGS-CIMB Research 2018-06-18: Uptick In May Home Sales Singapore Property Developers Property Market Outlook CITY DEVELOPMENTS LIMITED SGX:C09 UOL GROUP LIMITED SGX:U14

Property Development & Inventory - Uptick In May Home Sales

  • May sales surged 53% m-o-m to 1,121 units.
  • Pace of new launches has accelerated; take-up rates remain healthy.
  • Maintain sector Overweight. Top picks remain UOL and City Developments.

May 2018 sales surged 53% m-o-m

  • May 2018 monthly private home sales came in at 1,121 units (1,257 including executive condominiums) which is 53% higher m-o-m and 8% above the May 2017 level. 
  • The bulk of the sales were in the Outside Central Region with 40% of total new sales coming from Twin Vew in the West Coast area and another c.12% of sales from new projects such as Amber 45 and Sixeen35 Residences. The rest were well spread out.

YTD sales at 32% of our full-year expectation

  • 5M18 take-up rate of 3,480 homes (4,476 including ECs) is still well within our expectation of 11,000-12,000 units for this year and we maintain our projections for now.
  • However, we note that while the take-up rate for May was still healthy, it was slightly lower at 1.06x (5M18 average: 1.11x) as the number of new launch units more than doubled from over a month ago.

More new launches; anticipate price growth trajectory to moderate

  • A number of new projects such as Affinity at Serangoon, The Gardens Residences and Margaret Ville have rolled out their launches in June at record pricing in their vicinity. In addition, new developments such as Rivercove Residences (former Rio Casa) have also started registering buyer interest.
  • With more projects coming onstream, we anticipate the price growth trajectory to remain positive, but at a more moderate pace, for the remainder of this year.

Remain sector Overweight as valuations improve

  • Share prices of Singapore developers have declined by c.5% in the past one month, in tandem with the broader market, and valuations, at 44% discount to RNAV and 0.71x P/BV, have retraced back to the -1 s.d. levels.
  • At this juncture, we find Singapore developers inexpensive and maintain our Overweight stance. We continue to prefer the big-cap names such as UOL and City Dev.
  • Potential catalysts are good take-up rates for new launches, while a key risk is faster-than-expected rise in interest rates which would erode affordability.

Highlighted companies

City Developments

  • Rating: ADD, Target Price S$13.41
  • In our view, City Dev’s land restocking activities would enable the group to continue to ride the residential upcycle and underpin its RNAV expansion. Meanwhile, the expansion of its new fee income platform could bolster ROE in the medium term.
  • The stock is trading at a 33% discount to RNAV.

UOL Group

  • Rating: ADD, Target Price S$9.65
  • UOl has a high recurring income base, underpinned by rentals, hotel operations and investment holdings. It has good office exposure through UIC.
  • UOL is now trading at 36% discount to RNAV.

LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2018-06-18
SGX Stock Analyst Report ADD Maintain ADD 13.410 Same 13.410
ADD Maintain ADD 9.650 Same 9.650