Secondly, concerns about land costs, construction costs, and demand and supply are giving investors second thoughts on P/NAV discounts as the NAV part continues to fall.
Property stocks remain weak, with City Developments (CDL) and UOL Group hitting new one-year lows. CDL has reached its lowest point since the Global Financial Crisis. This trend is not unique to CDL. Hong Fok Corporation, Ho Bee Land (SGX:H13
) and Wing Tai Holdings (SGX:W05) are also facing pressure. The price action in these stocks may signal deteriorating fundamentals.
The reasons could be fourfold. First, the developers’ own balance sheets are not liquid. This missive has repeatedly indicated that P/NAV discounts are not the only valuation yardsticks for developers. Balance sheet liquidity, value growth in the form of earnings, and positive operating and free cash flow are some other metrics some investors look at.
