Property Development & Inventory - CGS-CIMB Research 2021-01-15: Strong End To 2020

CITY DEVELOPMENTS LIMITED (SGX:C09) CAPITALAND LIMITED (SGX:C31) UOL GROUP LIMITED (SGX:U14)

Property Development & Inventory - Strong End To 2020

Dec 2020 new home sales rose 130% y-o-y and 54% m-o-m to 1,265 units.
We project home sales of 9k-10k and 0-5% hike in home prices in 2021F.
Reiterate sector Overweight on valuations. Preferred picks: City Developments (SGX:C09), CapitaLand (SGX:C31), UOL Group (SGX:U14).

Dec 2020 private new home sales saw a 130% y-o-y (+54% m-o-m) surge to 1,265 units, boosted by the launch of UOL’s The Clavon, which accounted for 37% of Dec’s sales. Excluding Executive Condominiums (ECs), monthly sales also saw a 126% y-o-y (+57% m-o-m) jump to 1,217 units.
Other projects that continue to do well include Ki Residences at Brookvale and Parc Clematis. Outside Central Region (OCR) projects made up 76% of total ex-EC take-up for the month while suburban projects accounted for another 19%.

2020 primary sales totaled 10,320 units, a marginal 3.2% decline over 2019 volume, commendable in light of the COVID-19 pandemic. Meanwhile, according to Singapore Real Estate Exchange (SRX), the non-landed resale market saw 1,236 units changing hands in Dec 2020 (-5% m-o-m, +79.4% y-o-y), led by active transaction volumes in the Outside Central Region. This brings 2020 resale transactions to 10,712, or 18.1% higher y-o-y.
We believe demand was underpinned by the low interest rate environment and a measure of pent-up demand. We expect volume demand to remain stable in 2021F, at between 9,000-10,000 units.

Private home prices increased 0.1% for 9M20 vs. end-2019 levels and we anticipate a further uptick in 4Q20. We expect private home prices to rise by a slightly better 0-5% for 2021F, thanks to robust demand.
Overall, we expect prices to pace economic recovery as developers continue to price their projects competitively in order to move inventory.

Although share prices have risen, developers’ valuations still look inexpensive to us, trading at a 50% discount to RNAV, close to the 1.5 s.d. below long-term mean discount.
Our strategy for developers would be to prefer those with high recurring cashflow base and strong balance sheets that would enable them to tap into any opportunities during this slower cycle. Our preferred picks are City Developments (SGX:C09), CapitaLand (SGX:C31) and UOL Group (SGX:U14).
Sector re-rating catalysts: good sell-through rates for new launches.
Downside risks: prolonged drag from the COVID-19 outbreak, and weaker-than-expected macro outlook which could dampen demand for big-ticket items such as housing.
See Singapore developers (CapitaLand (SGX:C31), City Developments (SGX:C09),Frasers Property (SGX:TQ5), GuocoLand (SGX:F17), Ho Bee Land (SGX:H13), Hongkong Land (SGX:H78), UOL Group (SGX:U14), Wing Tai (SGX:W05), etc) peer comparison table in the PDF report attached below.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-01-15

SGX Stock Analyst Report ADD MAINTAIN ADD 10.100 SAME 10.100

ADD MAINTAIN ADD 3.420 SAME 3.420

ADD MAINTAIN ADD 7.600 SAME 7.600