SINGAPORE (Apr 5): KGI Securities is maintaining its “buy” call on Sing Holdings with a higher target price of 68 cents.
In a Thursday report, analyst Joel Ng says sales of the group’s Parc Botannia project have come in above expectations.
The group launched the 735-unit private residential project at Fernvale in Nov 2017.
See: Sing Holdings and Wee Hur to launch Parc Botannia on Nov 11
“Going by the upturn in property prices and volume transactions, we expect it to be able to sell all the units over the next two years at an average price of $1,250 psf,” says Ng.
Just four months into the launch, the group has already issued options to purchase for up to 43% of units as of Feb 26.
From this project alone, the analyst estimates PATMI contribution of about $130 million or 32 cents each, making up 75% of the group’s current market capitalisation.
The neighbouring developments around Parc Botannia were also 100% sold.
High Park Residences, developed by Chip Eng Seng and located right next to Parc Botannia, was fully sold within 20 months from launch despite the weak property market in 2015 and 2016.
In addition, URA estimates that private home prices increased 3.1% y-o-y in 1Q18, adding on to the positive momentum of the 0.8% y-o-y increase in the previous quarter.
“We expect foreign investment demand and the robust en bloc sales to contribute positively to the property market sentiment in 2018,” says Ng.
Furthermore, the analyst believes that the upward rerating of property developers may continue.
This came on the back of a y-o-y doubling of en bloc to $2.3 billion in 1Q18, while foreign demand returned to the local property market.
“We note this is on the high-end segment but we believe this could be a precursor for demand in the mass-market segment,” adds Ng.
In 2017, private home purchases by foreigners that are non-PRs rose by 45% to 1,549 homes, accounting for 7% of total home sales, according to Edmund Tie & Company.
The rising interest among foreign investors may partly be explained by the attractive valuations of Singapore’s residential prices compared to other key Asian cities such as Melbourne, Sydney, Hong Kong and Tokyo.
Currently, the stock is trading at an “attractively deep discount” of more than 50% to its 98 cents RNAV, which the analyst believes may eventually narrow upon progressive recognition of profits from Parc Botannia in 2018 and 2019.
As at 4.10pm, shares in Sing Holdings are trading 1 cent higher at 43 cents.
