Singapore Property - Maybank Kim Eng 2018-06-18: Buying Opportunity

Singapore Property - Maybank Kim Eng 2018-06-18: Buying Opportunity Singapore Property Market Property Developer Stocks CAPITALAND LIMITED SGX:C31 UOL GROUP LIMITED SGX:U14 CITY DEVELOPMENTS LIMITED SGX:C09 GUOCOLAND LIMITED SGX:F17 BUKIT SEMBAWANG ESTATES LTD SGX:B61 HO BEE LAND LIMITED SGX:H13 OXLEY HOLDINGS LIMITED SGX:5UX

Singapore Property - Buying Opportunity


Housing recovery intact; remain POSITIVE

  • With the demand-supply outlook still supportive of a housing recovery, we expect the recent home-price rally to continue and see buying opportunities during the current share-price weakness.
  • Speculative buying is near its historical low while existing measures continues to ensure financial prudence amongst property buyers. As such, we see no need for further policy tightening.
  • We attribute 5M18’s soft developer sales to a lack of new launches, not a sign of market weakness. We believe housing demand remains strong, going by healthy overall volumes, including secondary market transactions.
  • Remain POSITIVE on the sector with UOL as our top pick among the large caps and GuocoLand among the mid-caps. Risks include a sharp rise in interest rates and property price falls.
  • Sector benchmark CDL trades at 21% discount to RNAV vs parity in the early stages of a property upcycle.



Stocks & physical prices diverge

  • Despite a 7% rebound in home prices YTD, developer stocks have shed 4%. With the demand-supply outlook still supportive of a housing recovery, we see this divergence as an opportunity to raise sector exposure.
  • We forecast annual net supply of just 5,300 units for 2018-20E vs the market’s long-term average absorption of 11,400 units. Furthermore, replacement demand from the 6,000+ households displaced by en-bloc deals announced since 2017 will soak up a large part of this supply. Given this, we expect lower vacancy over the next few years.


Further tightening likely not necessary

  • We see no need for further policy tightening. While the housing market is recovering, we believe it is not overheating.
  • Sub-sales are near their historical low, at just 1.5% of transactions. Intact cooling measures implemented after GFC should continue to keep prices and exuberance in check.
  • Lastly, we believe gradual increases in interest rates are natural dampeners for the market.


Soft sales not a sign of weakness

  • URA reported that developers sold 1,121 private homes in May. This brought new-home sales to 3,431 units in 5M18, down 38% from 5M17. As we attribute the y-o-y drop to limited launches in the early part of 2018, we do not read it as a sign of market weakness.
  • We believe housing demand remains strong, as evidenced by healthy overall volumes, including secondary market transactions. We maintain our new-home sales forecast of 12,000 units for this year, expecting a stronger 2H18 to provide re-rating catalysts.









Derrick Heng CFA Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2018-06-18
SGX Stock Analyst Report BUY Maintain BUY 4.100 Same 4.100
BUY Maintain BUY 10.850 Same 10.850
BUY Maintain BUY 14.200 Same 14.200
BUY Maintain BUY 3.000 Same 3.000
BUY Maintain BUY 8.550 Same 8.550
SGX Stock Analyst Report BUY Maintain BUY 3.300 Same 3.300
BUY Maintain BUY 0.560 Same 0.560



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