Real Estate Day Wrap-Up - CGS-CIMB Research 2019-04-17: APAC Realty, CapitaLand, City Developments


CGS-CIMB Real Estate Day - Key Highlights From Participating Companies


  • APAC Realty (SGX:CLN) provides real estate brokerage services for sales and rental of residential, commercial, and industrial properties, as well as management services for real estate developments. It holds the exclusive ERA regional master franchise rights for 17 countries in Asia Pacific as well as the master franchise rights for Coldwell Banker in Singapore. Through its ERA franchise network, the Group has one of the largest brand footprints in Asia with more than 17,800 salespersons across 637 offices.
  • Common questions raised by investors were generally related to:
    1. outlook on the Singapore private residential market;
    2. updates on overseas expansion activities; and
    3. impact of competition from proptech.
  • In terms of the outlook for the Singapore private residential market, management expects volumes to be comparable to 2018 due to the sheer number of launches offsetting the lower reported take-up rates at multiple projects. En-bloc sellers could help to prop up the resale and primary markets as they look for replacement homes.
  • Management also highlighted that on a relative basis, Singapore property prices remain competitive for China-based buyers which has been a source of strong demand. With the large number of upcoming launches, competition between projects is expected to lead developers to increased commission for agents. However, according to management the impact on margins would not be significant as the commission payout structure from APAC Realty to its agents remains constant.
  • In terms of expansion plans, management revealed that APAC Realty aims to use a franchise model for countries where it does not have an established presence like Vietnam and Cambodia, while a direct ownership model would be preferred for countries where the ERA brand name is established like Indonesia and Thailand.
    • In Indonesia, the ERA franchisee has over 20 years of operating history with c.7,000 agents.
    • In Thailand, APAC Realty has a 80% stake in ERA Thailand via a JV with the current owner-operator.
    • For the rest of the ASEAN countries, Japan, Taiwan and Korea, APAC Realty will employ a franchise strategy for the moment.
  • In terms of competition from proptech companies, management believes that companies like PropertyGuru and 99.co have helped to improve agent productivity by expanding its reach and lowering the cost of advertising. Successful proptech companies have been using listing portals which also help buyers find and shortlist properties so this does not directly compete with the brokerage business of APAC Realty.
  • Furthermore, management mentioned that agencies are unlikely to be disrupted since property purchases are large ticket items which require agents to help broker deals, schedule viewings and settle documentation.


  • CapitaLand (SGX:C31) is one of Asia’s largest real estate companies and is an owner and manager of a global portfolio comprising integrated developments, shopping malls, lodging, offices, homes, REITs and funds. Real estate under management stands at S$100.1bn as at end-Dec 2018.
  • To complement its strength as landlord and operator, its ‘office of the future’ strategy involves integrating core and flexible space into an ecosystem of innovative workplace solutions. It has invested in a 50% stake in coworking operator, The Work Project, to expand its core-flex offerings to its office tenants.
  • The session was focused on the flexible office space market in Singapore. Common questions raised by investors were generally related to:
    1. business model of co-working operators and competitive landscape in the Singapore flexible office space sector and
    2. supply and demand dynamics within this sector in Singapore.
  • According to property consultant reports, the Singapore flexible office space market is estimated to be 1.4m sqft or c.1.5% of total office stock in Singapore. As a tenant of major office landlords, co-working operators lease structures are fairly similar to other office tenants in terms of lease tenure and rents. From the perspective of lease terms of end-tenants with co-working operators, the tenure can range from 1 month to 2-3 years, with an estimated average of 1-2 years.
  • Demand for flexible space comes largely from start-ups, small companies as well as swing space appetite from major corporates. In terms of new supply, there are confirmed deals for a further 0.4-0.5m sqft of new flex space coming into the market, which may cause some short-term indigestion in the market place.
  • From CapitaLand’s perspective, its ‘office of the future’ strategy involving integrating core and flexible space into an ecosystem of innovative workplace solutions, encompasses four pillars including core and flex space demand, value-added services, technology and community development.
  • We maintain our ADD rating on CapitaLand. Our current RNAV and Target Price of S$5.48/ S$3.56 has not factored in the accretive impact of the Ascendas-Singbridge acquisition. This should be supportive of its share price performance.
  • Downside risks to our ADD call include slower capital deployment.


  • City Developments (SGX:C09) is a leading global real estate operating company with a network spanning 103 locations in 29 countries and regions. Its stable income and geographically-diverse portfolio comprises residences, offices, hotels, serviced apartments, integrated developments and shopping malls. Its London-listed subsidiary, Millennium & Copthorne Hotels plc, is one of the world’s largest hotel chains with over 135 hotels worldwide.
  • Common questions raised by investors were generally related to:
    1. planned project launches in Singapore this year and outlook for the Singapore private residential market;
    2. impact from latest Master Plan 2019 on the investment property portfolio and
    3. recurring income and strategy to grow ROEs.
  • City Developments plans to launch a total of 2,434 residential units in 2019, from Boulevard 88, Amber Park, Haus on Handy, Sumang Walk EC and Sengkang Central sites. Boulevard 88, a 154-unit freehold luxury residence development, saw 23 units changing hands during its recent private preview, generating S$160m of sales. 60% of the buyers are Singaporeans. Amber Park, Haus on Handy and Sumang Walk EC are planned to be rolled out in 2Q19 and Sengkang Central in 4Q19.
  • Within its investment property portfolio, City House and Fuji Xerox Tower should benefit from the incentive schemes from the Master Plan 2019.
  • To boost its current ROE, the group could potentially selectively divest assets as well as grow its fee and recurring income platform. For 2019, it intends to remain in acquisition mode. It has recently entered the fast-growing UK private rented sector with the acquisition of a freehold site in Monk Bridge, Leeds as well as a successful bid on the Sims Drive land parcel in Singapore.
  • We retain our ADD call with Target Price of S$10.66. Potential re-rating catalysts include a pick-up in the Singapore residential market while downside risks include a slower-than-expected capital deployment.

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LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-04-17
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