UOL GROUP LIMITED (SGX:U14)
CAPITALAND LIMITED (SGX:C31)
CITY DEVELOPMENTS LIMITED (SGX:C09)
Property Development & Inventory - Better Sales In May19'
- May monthly home sales volume was 28% higher m-o-m but 15% lower y-o-y.
- 5M19sales of 3,632 units represent a 74% sell-through rate.
- Maintain sector Overweight; Our preferred picks are UOL, CapitaLand and City Developments.
May sales 28% higher m-o-m
- Developers sold 952 new private housing units in May, up 28% m-o-m but 15% lower compared to May 2018. The bulk of sales (51%) came from Rest of Central Region while suburban projects made up another 43%. The most popular developments include Amber Park, Parc Komo and The Woodleigh Residences, which collectively accounted for one-third of sales.
- Total sales represent a take-up rate of 68% for the month.
5M19 take-up represents 74% of new units launched
- For 5M19, primary home sales totalled 3,632 units, 4% higher y-o-y. This represents a 74% take-up rate for the 4,927 units that were launched, indicating continued buying interest in the market.
- We maintain our expectation for a 9,000-10,000 sales volume for 2019F.
Private home prices to remain range-bound
- That said, the Urban Redevelopment Authority (URA) property price index has dipped 0.7% from its 3Q18 high, indicating that the market is reaching a new equilibrium.
- We expect private residential prices to remain competitive in the face of a large number of potential new launches. Hence, we retain our expectation for private home prices to fluctuate between 0% and +3% in 2019F.
Maintain sector Overweight
- Developers’ share prices are trading at an average 47% discount to RNAV, midway between 1 s.d. and 2 s.d. of long-term mean. Current valuations are inexpensive, in our view. We expect property stocks to trade range-bound while awaiting fresh sector catalysts, such as improvement in sell-through rates or sustainable take-up rates.
- We like diversified companies such as UOL, CapitaLand and City Developments, given their diversified income sources and growing recurring income base.
- Downside risks include an economic slowdown which could dampen buying appetite for big-ticket items such as housing.
Highlighted Companies
- ADD, Target Price S$3.56.
- Strong capital recycling and deployment into new investments would continue to drive ROE. The recent transformational acquisition of Ascendas-Singbridge should propel CapitaLand to becoming Asia’s leading diversified real estate group.
- See Capitaland Share Price | Capitaland Target Price | Capitaland Analyst Reports | Capitaland Dividends | Capitaland Announcements | Capitaland Latest News.
- ADD, Target Price S$10.66.
- In our view, City Developments’s land restocking activities would extend its residential earnings visibility. New investments in Europe and strategic investments in China would enable the group to deploy balance sheet capacity and bolster ROE in the medium term. The stock is trading at a 43% discount to RNAV.
- See City Developments Share Price | City Developments Target Price | City Developments Analyst Reports | City Developments Dividends | City Developments Announcements | City Developments Latest News.
- ADD, Target Price S$8.45.
- 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 42% discount to RNAV.
- See UOL Group Share Price | UOL Group Target Price | UOL Group Analyst Reports | UOL Group Dividends | UOL Group Announcements | UOL Group Latest News.
LOCK Mun Yee
CGS-CIMB Research
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https://research.itradecimb.com/
2019-06-17
SGX Stock
Analyst Report
8.450
SAME
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SAME
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SAME
10.660
