SINGAPORE (July 10): Maybank Kim Eng is maintaining its “positive” stance on Singapore’s property sector on improving market sentiment and robust bids in recent government land tenders.
In a Monday report, analysts Derrick Heng and Chua Su Tye note how strong capital flows and their implications to Singapore’s property market were a recurring theme and the main takeaway of their recent participation in the Real Estate Developer’s Association of Singapore’s (REDAS) property market update seminar, which took place last Friday.
“Contrary to a more cautious stance from the REDAS’ President in his opening address, market sentiment has improved significantly YTD, helped by strong system liquidity, and robust (record) bids in recent government land tenders,” recall Heng and Chua.
“These themes, we believe, together with the abating supply across the various subsectors and supported by new economy demand drivers, continue to reinforce the investment theses for the developers and SREITs.”
Maybank’s top large-cap “buy” recommendations among property developers are City Developments (CDL) and UOL Group with the respective target prices of $12.05 and $9.05.
Real estate investment trusts CapitaLand Commercial Trust (CCT), Keppel REIT (KREIT), Ascendas REIT (A-REIT), Mapletree Industrial Trust (MINT) have also been rated “buy” at target prices of $1.81, $1.18, $2.90 and $2.05 respectively.
Coupled with implications of strong capital flows as discussed during the seminar, the analysts highlight a potential return of foreign homebuyers in Singapore, which was mentioned by the consultants present.
Strong liquidity has also led to the trend of compressing cap rates for commercial properties across major markets, with investors now ranking Australia and Japan as their choice investment destinations, they add.
“Interestingly, consultants highlighted that office rents have already started to rebound in 1H17. Nonetheless, they caution that subsequent rent hikes will be constrained by stronger supply in 2021 from the potential office supply from the redevelopment of Golden Shoe and Central Boulevard site,” note the analysts.
“They see relative value in Singapore’s occupier market with annual office occupancy cost of SGD102 psf roughly half that of Hong Kong.”
With regards to the retail and hospitality segments, Heng and Chua note there was a “wide discourse” which took place over the seminar, although CBRE remains optimistic on hospitality while forecasting hotel revenue per available rooms (RevPARs) to recover in 2019 as supply tapers off.
As at 4:40pm, shares of CDL and UOL are trading at $10.85 and $7.58.
Units of CCT, KREIT, A-REIT and MINT are trading at $1.70, $1.15, $2.61 and $1.84, respectively.
