SINGAPORE (Oct 21): In September, new home sales reached the highest monthly sales since July 2018, when the latest round of property cooling measures came into effect.
According to data released by the Urban Redevelopment Authority (URA), developers sold a total of 1,270 private residential units, which represented a 13% m-o-m and 36% y-o-y increase.
In a Monday report, KGI says that fundamentally, the resilient new home sales have been driven by improved housing affordability. The price-to-income ratio has improved to around 7x in 2019, down from 9x in 2010, driven by increasing household incomes.
This shows that the property sector is experiencing a positive momentum. YTD, local property-related companies have performed well, with CapitaLand, City Developments (CDL) and UOL Group gaining between 16% and 31%. These three blue-chip stocks are also KGI’s favourite picks within the property space.
“We believe there could be further upside to property-related companies as many of them are still trading below their five-year price-to-book averages,” says KGI.
Although CapitaLand is trading at a 5% premium to its five-year price-to-book average, KGI expects a rerating as it achieves its 9-11% ROE target following the $11 billion acquisition of Ascendas-Singbridge.
The merger and acquisition created a bigger entity, which is new one of Asia’s largest diversified real estate player with more than $123 billion of assets under management (AUM).
Additionally, CapitaLand on Oct 1 announced plans to grow its AUM in India to $7 billion by 2024 from $3.3 billion currently.
On top of the improving conditions of the Singapore property sector, CDL will be compulsorily acquiring the remaining shares in its London-listed subsidiary Millennium & Copthorne (M&C) held by shareholders who have not yet accepted the final offer of 685 pence per share. This final offer will remain open until further notice.
Following the shares acquisition, M&C will be re-registered as a private company.
In its latest 2Q19 results, CDL saw a 26.4% y-o-y drop in its earnings to $162.4 million, on the back of a 37.5% fall in revenue
On the other hand, UOL saw a 48% y-o-y increase in its latest 2Q19 earnings to $195.4 million, despite revenue dropping 20% to $512.3 million.
The group also recently announced that it has divested an apartment unit located at Silat Avenue for a consideration of $0.9 million to an interested person.
As at 4.00pm, shares in CapitaLand, CDL and UOL are trading at $3.60, $10.50 and $7.66, respectively.
