We issue an update on the property developers today.

The recent introduction of property cooling measures is expected to have a far-reaching impact on the Singapore property market and will lead to a estimated 40% drop in decline in transaction volumes in the primary market and PPI likely turn flat with a downside bias as investment demand (locals and foreigners) are likely to dry up. While macro catalyst maybe lacking for developers, we highlight that valuations are very attractive at 0.55x P/NAV with most developers trading at lower levels below that of past measures. We focus on stock specific catalysts for outperformers and prefer CLI SP (BUY, TP S$4.0), CDL (BUY, TP S$10.50) and Hobee (BUY, TP S$3.80).

Key thesis:

•             Cooling measures a timely break to robust property price and transaction surge in 2021

•             Slowing market to have minimal impact on selected listed developers given strong pre-sales trends, leaving only c.27% of stock unsold.

•             Developers trading below trough levels seen in past cooling measures, accumulate on further weakness

•             Pick CLI, CDL and Hobee.

Current Developer P/NAV compared to previous trough P/NAV post cooling measures

Lowest P/NAV multiples seen post measures:FSTREHCity DevUOLFPLBSWingTHobeeGuocoland
Govt series of cooling measures (17/12)0.55x0.73x0.61x0.47x0.97x0.40x0.52x0.42x
Govt increased average minimum size (18Oct’18)0.52x0.71x0.52x0.62x1.08x0.40x0.47x0.47x
Govt implemented ABSD (6’Jul’18)0.52x0.74x0.53x0.62x1.08x0.40x0.46x0.48x
Govt imposed TDSR (9th Dec’13)0.75x1.02x0.70x1.18x0.47x0.55x0.96x
Govt imposed TDSR (29th Jun’13)0.80x1.15x0.77x1.34x0.56x0.56x0.88x
Govt raised ABSD/lowered LTV (12th Jan’13)0.89x1.26x0.75x1.46x0.50x0.52x0.91x
Govt first implemented ABSD (8th Dec’11)0.62x1.19x0.56x1.02x0.39x0.42x0.84x

Source: URA, Bloomberg Finance LLP, DBS Bank