SINGAPORE (Apr 3): CIMB is maintain the property and development sector at "overweight" with UOL and City Developments as top picks after q-o-q private homes price hike came in strongest in nearly eight years.
"We maintain our 2018 projections of 5% price appreciation and volume demand to reach 11,000-12,000 units," says analyst Lock Mun Yee who estimates Singapore-listed property stocks are currently trading at a 35% discount to RNAV.
"With the anticipated newsflow on upcoming new launches in the sector, we believe there is room for share price outperformance," says Lock in a Monday report.
According to the Urban Redevelopment Authority (URA) property price index flash estimate, 1Q18 private home prices rose 3.1% q-o-q vs. 0.8% q-o-q increase in 4Q17.
See: Singapore's 1Q private home price growth fastest in nearly 8 years, backs recovery signs
This was led by a 5% price increment for properties in the Core Central Region while prices of homes in Rest of Central Region and Outside Central Region rose 1.1% and 3.8% respectively. Conversely, prices of HDB resale flats slipped 0.8% q-o-q.
Lock says this is the strongest q-o-q private homes price hike seen since 3Q10. Private residential prices are now 4.7% above the recent trough and 7.5% shy of the 2013 peak.
"While the overall private residential price hike is expected, the quantum of expansion is a little ahead of our full-year projection of 5% for the whole of 2018," says Lock.
Although private home sales to Feb 18 formed 9% of CIMB's full-year forecast, Lock anticipates the pace of new launches to pick up from 2Q onwards.
Potential catalysts include continued land restocking and good take-up rates at new launches. Key risks include faster-than-expected rise in mortgage rates, which could erode affordability.
CIMB has target prices of $13.44 and $9.67 for CityDev and UOL respectively.
As at 10.57am, shares in CityDev are trading at $13.03 or 1.21 times FY18 book value while shares in UOL are trading at $8.56 or 0.74 times FY18 book.
