SINGAPORE (Apr 17): CIMB Research is maintaining its projection that developers will launch 10,000 units of private homes in 2018, after total primary home sales rose 68% month-on-month to 788 units in March.
According to analyst Lock Mun Yee, the higher month-on-month sales last month were underpinned by the launch of The Tapestry, as well as “decent” take-up rates in ongoing projects including Grandeur Park Residences, Parc Botannia, and Kingsford Waterbay.
However, she highlights that total primary home sales in March was only one-third of the volume a year ago.
“For 1Q18, developers recorded a total 1,627 units of sales volume ([compared to] 3,141 in 1Q17),” Lock says in a flash note on Monday. “As a ratio of newly-launched units, transaction volume in 1Q18 was still a healthy 1.52 [times].”
“While cumulative sales in 1Q18 account for 13-15% of our full-year demand projection, we maintain our expectation for buying appetite to reach 11,000-12,000 units in 2018F,” she adds.
Going forward, Lock anticipates that the sales run-rate will pick up.
She notes that Park Place Residences P2 and The Verandah were marketed with decent sell-through rates in April, and two to three major new developments are expected to be rolled out over the next two months.
“Given the anticipated newsflow on upcoming new launches in the sector, we believe there is room for share price outperformance by property stocks this year,” says Lock, adding that SGX-listed property stocks are trading at an average 36% discount to revalued net asset value (RNAV).
CIMB is maintaining its “overweight” rating on the property sector.
The brokerage’s top picks for the sector are City Developments (CDL) and UOL Group.
“City Development’s land-restocking activities would enable the group to continue to ride the residential upcycle and underpin its RNAV expansion. Meanwhile, the expansion of its new fee income platform could bolster ROE in the medium term,” says Lock.
Meanwhile, she says UOL has a high recurring income base, underpinned by rentals, hotel operations and investment holdings.
It also has good office exposure through United Industrial Corporation (UIC), she adds.
CIMB has “add” calls on CDL and UOL, with target prices at $13.44 and $9.67, respectively.
As at 12.42pm, shares of CDL are trading 5 cents down at $12.61, implying an estimated price-to-earnings ratio of 21.3 times and a dividend yield of 1.4% for FY18.
Meanwhile, shares of UOL are trading 2 cents up at $8.69, implying an estimated price-to-earnings ratio of 17.2 times and a dividend yield of 0.8% for FY18.
