Property Development & Inventory - CGS-CIMB Research 2019-06-06: Stable 2H19 Land Sale Programme

Property Development & Inventory - CGS-CIMB Research | SGinvestors.io CAPITALAND LIMITED (SGX:C31)

Property Development & Inventory - Stable 2H19 Land Sale Programme

  • New residential supply from the 2H19 GLS programme is little changed from that of 1H19, at 6,430 units.
  • Ample medium-term supply is expected from the large influx of new completions over the next 2-3 years.
  • Maintain sector Overweight. Our top pick is UOL Group (SGX:U14).

2H19 GLS programme offers 13 confirmed and reserve sites

  • The government has released land sites for a total of 6,430 residential units (1,715 confirmed, 4,715 reserve), 92k sqm of commercial GFA and 1,100 hotel rooms under its latest 2H19 land sale programme (GLS). Of the total 13 land parcels, four are new offerings. This includes a master developer site for Kampong Bugis, which can house an initial 1,000 residential units and 10k sqm of commercial GFA.

Little change in 2H19 private housing supply

  • Private residential supply is little changed hoh from 1H19. That said, with the sale of existing land parcels in 1H, three new land sites, including one for executive condominium development, were introduced for the 2H. There was an allocation for a new hotel development in the River Valley area, with a potential 560 rooms.

Ample medium-term housing supply

  • On a y-o-y basis, the government has toned down potential residential supply from GLS sites by 20% in 2019 vs. 2018. According to the Urban Redevelopment Authority (URA), there are about 44,000 private housing units in the pipeline, including 39,000 unsold units from the GLS and enbloc sites with planning approval and another 5,000 units from sites that are pending approval.
  • We see this moderated land sale programme as positive for the sector as it allows the market to digest the anticipated large incoming new completions over the next 2-3 years. This should also be supportive of private home prices.

Maintain sector Overweight

  • We remain positive on property developers amid stabilising private residential prices and lessened near-term policy risk. The current valuation is inexpensive, at a 47% discount to RNAV. We expect property stocks to trade rangebound while awaiting fresh sector catalysts, such as improvements in sell-through rates.
  • Upside risk includes better take-up rates for new launches, while downside risk is moderated appetite for new home purchases given the weaker macroeconomic outlook.

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LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-06-06
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