As the private residential market is holding up well, CapitaLand, City Developments (CDL) and UOL Group continue to be the preferred picks of CGS-CIMB Research.
The brokerage notes that the valuations of property developers are “inexpensive” as they trade at 55% discount to their revalued net asset value.
“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,” CGS-CIMB analyst Loke Mun Yee writes in a note dated Oct 15.
CGS-CIMB has maintained its “add” calls for CapitaLand, CDL and UOL, with unchanged target prices of $3.42, $10.10 and $7.29, respectively.
The brokerage has also kept its “overweight” rating for the sector.
According to the Urban Redevelopment Authority (URA), primary home sales grew 4.6% y-o-y and 5.6% m-o-m to 1,329 units in September.
This excludes the sales of executive condominiums (ECs).
Meanwhile, the non-landed resale market also rose 62.8% y-o-y and 0.4% m-o-m to 1,286 units in September, according to the Singapore Real Estate Exchange (SRX).
As a result, the residential price index moved 0.8% higher q-o-q, adds URA.
CGS-CIMB says private home prices could likely trend closer to the higher end of its 0% to -5% projection for 2020, despite the weak macro outlook.
“We still expect prices to stay range-bound in 2020 as we believe that the slower macro outlook and ample supply imply that developers would have to price their projects competitively in order to move inventory,” says Loke.
As at 11.47 am, CapitaLand was flat at $2.77 with 1.9 million shares changed hands.
CDL was up 9 cents or 1.2% at $7.76 with trade volume of 640,700 shares.
UOL was up 8 cents or 1.2% at $6.48 with 385,300 shares changed hands.
See also: CapitaLand, CDL top picks as valuations too cheap to ignore: DBS
