SINGAPORE (July 10): Property stocks Bukit Sembawang, Oxley and GuocoLand have had their recommendations downgraded by Maybank Kim Eng in light of new measures to cool the property market and keep price increases in line with economic fundamentals.
Even though Bukit Sembawang continues to trade at a steep discount of about 50% to its RNAV, Maybank expects the policy tightening to weigh on the share price performance.
“We downgrade the stock to ‘hold’ from ‘buy’ with a lower target price of $5.10, based on a 50% discount to its revised RNAV of $10.20,” says Maybank.
With 5-10% increases in the ABSD (additional buyer stamp duty) for property investors, Maybank expects developers to lower their ASPs (average selling price) to stimulate demand.
As pure residential exposure, Maybank says Bukit Sembawang is highly exposed to this sector headwind.
“We cut ASPs by about 3-6% across all projects and mark down its legacy land value accordingly. We cut EPS by up to 14%,” says Maybank.
Separately, Maybank has downgraded Oxley to “hold” from “buy” with a lower target price of 34 cents, based on 50% RNAV discount from 20% previously.
With almost 30% of its valuation due to the Singapore residential market, the research house expects the recent policy tightening to weigh on stock sentiments.
“We cut RNAV by 4.2% for ASP downgrades,” says Maybank which expects developers to lower their ASPs to stimulate demand given the 5-10% ABSD increases.
With about 3,800 housing units as of May, Oxley has one of the largest pool of saleable resource in Singapore. Still, the company has managed to de-risk part of its exposure by launching Riverfront Residences and Affinity at Serangoon before the cooling measures were implemented on July 6.
“We lower ASPs by 3-7% and cut EPS by up to 16%. We expect its elevated financial leverage to magnify the impact on its bottom line,” says Maybank.
As for GuocoLand, Maybank is cutting its target price to $2.00, based on a revised RNAV discount of 45% from 20%.
With large exposure to the high-end market, Maybank expects demand for GuocoLand’s housing stock to be dampened by the ABSD increases.
“We downgrade our ASP assumptions by up to 12% and RNAV by 2.7%. With limited upside to our target price, we downgrade to stock to “hold” from “buy”,” says Maybank who expects GuocoLand to cut ASPs for its high-end stock by about 10%.
With almost half of Martin Modern already sold, future price weakness should not impact this project, says Maybank, but the pricing headwinds will affect its unlaunched projects at Beach Road and Pacific Mansion more.
“We cut their ASPs to $2,600 psf and $2,800 psf respectively,” says Maybank.
Shares in Bukit Sembawang, Oxley and GuocoLand are trading at $5.28, 34 cents and $1.83 respectively.
