Property Development & Inventory - CGS-CIMB Research 2021-04-15: Good Take-Up At New Launches Boosts Sales

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

Property Development & Inventory - Good Take-Up At New Launches Boosts Sales

Mar 2021 ex-EC home sales surged 96% y-o-y and doubled m-o-m.
We expect home sales of 9k-10k and 0-5% hike in home prices in 2021F.
Reiterate sector Overweight on valuations. Preferred picks: UOL Group (SGX:U14), City Developments (SGX:C09), CapitaLand (SGX:C31).

Mar monthly home sales came in at 1,373 units, or 1,296 units excluding executive condominiums (EC). Excluding ECs, volume transaction was 96% higher y-o-y and double that of Feb 2020, due mainly to the launch of Midtown Modern, which made up 28% of total monthly sales. Other top selling projects include Treasure at Tampines, Amber Park and Ki Residences at Brookvale.
Core Central Region (CCR) projects made up 42% of the monthly volume transactions while city fringe projects made up 30%, and suburban projects accounted for the balance 28%.

Transactions in the first three months of 2021 totalled 3,550 units, up 57% y-o-y and accounted for 36-39% of our full-year expectation of 9,000-10,000 units.
Meanwhile, according to Singapore Real Estate Exchange (SRX) data, the resale market remained active with 1,662 units changing hands in Mar, up 28.9% m-o-m and 122.5% y-o-y, led by active transaction volumes in the Outside Central Region. We believe the demand was underpinned by the still-low interest rate environment, a measure of pent-up demand, and wealth creation from a robust stock market.

According to SRX, overall resale prices ticked up 0.1% m-o-m bringing end-Mar 2021 prices up 2.4% compared to end-2020. We expect private home prices to rise a slightly better 0-5% in 2021F, thanks to robust demand. Overall, we expect prices to pace the economic recovery as developers continue to move inventory.

Developers’ valuations still look inexpensive to us, trading at a 45% discount to RNAV, close to 1 standard deviation below long-term mean discount. We prefer developers with a high recurring cashflow base and a strong balance sheet that would enable them to tap into any opportunities during this slower cycle. Our preferred picks are UOL Group (SGX:U14), City Developments (SGX:C09), CapitaLand (SGX:C31).
See peer comparison table for property developer peers including Frasers Property (SGX:TQ5), GuocoLand (SGX:F17), Ho Bee Land (SGX:H13), Wing Tai (SGX:W05), Hongkong Land (SGX:H78) 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 2021-04-15

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