Property Development & Inventory - CGS-CIMB Research 2020-12-03: Keeping A Light Hand On Land Supply

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Property Development & Inventory - Keeping A Light Hand On Land Supply

  • Supply of land for new residential units in 1H21 government land sale (GLS) programme is marginally higher compared with 2H20, but still moderate.
  • Moderate new land supply and declining pipeline inventory are likely to be supportive of home prices in the longer term, in our view.
  • Reiterate sector Overweight. Our preferred picks are CapitaLand (SGX:C31), City Developments (SGX:C09), UOL Group (SGX:U14).

1H21 GLS programme offers 13 confirmed and reserve sites

  • The government has released land sites for 7,045 residential units (1,605 confirmed, 5,440 reserve), 101.2k sq m GFA of commercial space and 1,070 hotel rooms under its 1H2021 GLS programme. Of the total 13 sites, four are new offerings, namely Slim Barracks Rise Parcels A & B in the confirmed list, and Jln Tembusu and an executive condominium site at Tampines St 62 (Parcel B), in the reserve list.
  • The confirmed list sites are scheduled to be launched in 2Q21. No new sites for predominantly commercial or hotel use were offered in the latest land sale programme.
  • See Fig2 in PDF report attached below for further details on Singapore's 1H21 government land sale programme.

Marginal increase over 2H20 private housing supply

  • Overall, on a h-o-h basis, the private residential supply of 7,045 units in 1H21 is marginally higher than the total of 6,670 units offered in 2H20. The number of residential units offered under the confirmed list is also higher vs. that in 2H20. We see this paced land supply as positive for the sector as it allows the market to assess the impact of COVID-19 on the sector, in light of the current macro-economic conditions.

Declining unsold inventory in the pipeline

  • Meanwhile, according to the Urban Redevelopment Authority (URA), the number of unsold private housing units in the pipeline has been declining over the past seven quarters and stands at 26,483 units at end-3Q20. This should also be supportive of private home prices in the longer run.

Reiterate sector Overweight

  • Developer stocks’ valuations are attractive, trading at 52% discount to RNAV, close to 1s.d. below long-term mean. Our strategy for developers would be to prefer those with high recurring cashflow base and strong balance sheets that would enable them to tap any opportunities during this slower cycle.
  • Our preferred picks are CapitaLand (SGX:C31), City Developments (SGX:C09), UOL Group (SGX:U14).
  • See Singapore developers' peer comparison table in PDF report attached below.
  • Potential re-rating catalysts: good sell-through rates for new launches.
  • Downside risks: a prolonged drag from the coronavirus outbreak and a weaker-than-expected macro outlook, which could dampen demand for big-ticket items such as housing.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-12-03
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