Property Sector - CGS-CIMB Research 2019-04-17: Real Estate Day Wrap-up

Property Sector - CGS-CIMB Research | SGinvestors.io UOL GROUP LIMITED (SGX:U14) CAPITALAND LIMITED (SGX:C31) CITY DEVELOPMENTS LIMITED (SGX:C09)

Property Sector - CGS-CIMB's Real Estate Day Wrap-up

  • We continue to see strong investor interest in property companies spanning across the value chain.
  • Outlook for the Singapore private residential market remains stable while overseas diversification remains one of the key strategies.
  • Maintain sector OVERWEIGHT. Top picks – UOL Group, CapitaLand and City Developments.



Strong interest from investors in the property sector

  • We hosted 73 clients and 9 corporates at our real estate corporate day. Participating corporates spanned across the value chain, including property services companies as well as property development and investment companies.
  • Key questions centred around the outlook on the Singapore residential and office market, overseas diversifications and recent corporate actions. There was also a knowledge sharing session on the Singapore core-flex office space segment.
  • Overall, investors continue to see value in property developers given the still inexpensive valuations.


Singapore residential outlook remains stable

  • Both property developers and property services companies expect the Singapore residential market to remain relatively stable with primary transaction volumes in 2019 to remain relatively flat compared to 2018 as lower take-up rates are offset by a higher number of launches. The pace of new launches is expected to pick up from 2Q19.
  • Buying appetite from local as well as foreign buyers remains fairly robust. Our projection for primary sales volume to reach 9,000-10,000 units is unchanged, as is our expectation for private homes price performance to remain range-bound between 0% and 3% this year.


Knowledge sharing on core and flex office space

  • The flexible office market sharing session provided greater insight to this segment. Given the changing business needs today, flexible space providers fulfil the office space needs of small businesses/start-ups or provide swing space for major corporations. The Singapore flexible office space market is estimated to be about 1.4m sqft or c.1.5% of total office stock.
  • With about 0.4m-0.5m sqft of new flexible space expected to come onstream in the CBD area, some consolidation is anticipated in this segment.


Property services companies benefit from increased competition

  • Property services companies such as APAC REALTY LIMITED (SGX:CLN) and PROPNEX LIMITED (SGX:OYY) look set to enjoy some uplift from commission rate expansion as an expected bumper launch of new projects would mean more competition for buyers. At the same time, these companies are also planning to expand around the region to capture opportunities in bigger markets such as Indonesia.


Maintain Overweight, sector top picks UOL, CapitaLand and City Developments

  • We maintain our Overweight stance on property developers given the undemanding valuations, at a 45% discount to RNAV. We expect property stocks to trade range-bound while awaiting fresh catalysts such as improvement in sell-through rates or sustainable take-up rates.
  • We like diversified companies such as UOL GROUP LIMITED (SGX:U14), CAPITALAND LIMITED (SGX:C31) and CITY DEVELOPMENTS LIMITED (SGX:C09), given their diversified income source and high recurring income base. Downside risks include economic slowdown which could dampen buying appetite for big-ticket items such as housing.






LOKE Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-04-17
SGX Stock Analyst Report ADD MAINTAIN ADD 8.450 SAME 8.450
ADD MAINTAIN ADD 3.560 SAME 3.560
ADD MAINTAIN ADD 10.660 SAME 10.660



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