Property Development & Inventory - CGS-CIMB Research 2021-03-15: A Quieter February

Property Development & Inventory - CGS-CIMB Research | SGinvestors.io CAPITALAND LIMITED (SGX:C31) UOL GROUP LIMITED (SGX:U14) CITY DEVELOPMENTS LIMITED (SGX:C09)

Property Development & Inventory - A Quieter February




Few private home sales fall y-o-y and m-o-m on lack of launches

  • Feb monthly home sales came in at 756 units (645 units, excluding Executive Condominiums). Excluding ECs, volume transaction was 34% lower y-o-y and 60% m-o-m, due mainly to an absence of major new launches.
  • Projects that garnered the most unit sales in Feb include The Reef at King’s Dock and Normanton Park while Treasure at Tampines continued to move inventory.
  • City fringe projects made up 50% of sales while suburban projects accounted for another 40% of volume sales.
  • Transactions in the first 2 months of 2021 totalled 2,254 units, up 41% y-o-y and made up 22-25% of our full-year expectation of 9,000-10,000 units.


Private resale segment remains active

  • Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the resale market remained active with 1,399 units changing hands in Feb, +0.4% m-o-m and +126% y-o-y, led by active transaction volumes in the Outside Central Region. We believe the demand was underpinned by the low interest rate environment and a measure of pent-up demand.


Forecast 0-5% hike in private home prices in 2021F

  • According to SRX, overall resale prices ticked up 1% m-o-m bringing year-to-Feb 2021 prices up 2.3% compared to end-2020. We expect private home prices to rise by a slightly better 0-5% in 2021F, thanks to robust demand.
  • Overall, we expect prices to pace economic recovery as developers continue to move inventory.

Reiterate sector Overweight

  • Developers’ valuations still look inexpensive to us, trading at a 50% discount to RNAV, close to 1.5 s.d. below long-term mean discount.
  • We prefer developers with a 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 CapitaLand (SGX:C31), UOL Group (SGX:U14), City Developments (SGX:C09). See comparison with peers including Frasers Property (SGX:TQ5), GuocoLand (SGX:F17), Ho Bee Land (SGX:H13), Wing Tai (SGX:W05) in report attached below.
  • Sector re-rating catalysts: good sell-through rates for new launches.
  • Downside risks: faster-than-expected interest rate hikes, and weaker-than-expected macro outlook which could dampen the demand for big-ticket items such as housing.





LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-15
SGX Stock Analyst Report ADD MAINTAIN ADD 3.420 SAME 3.420
ADD MAINTAIN ADD 7.910 SAME 7.910
ADD MAINTAIN ADD 8.970 SAME 8.970



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