Property Development & Inventory - CGS-CIMB Research 2019-06-17: Better Sales In May19'

Property Development & Inventory - CGS-CIMB Research | SGinvestors.io 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


CAPITALAND LIMITED (SGX:C31)


CITY DEVELOPMENTS LIMITED (SGX:C09)


UOL GROUP LIMITED (SGX:U14)






LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-06-17
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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