Near term headwinds
- In line FY21 results, lifted by the red-hot property market; higher dividend declared
- Slight improvement in overall market share
- Cut FY22F/FY23F earnings by 24%/22% to factor in lower transaction volume assumptions
- Maintain HOLD with lower TP of S$0.67
Investment Thesis:
Impacted by cooling measures and rising interest rate. The recent property cooling measures and rising interest rate environment are expected to affect property market sentiment in the near term, at least for the next 1-2 years. With fewer new launches in the pipeline for 2022 as compared to 2021 and depleting inventory of unsold as well as construction delays, we have cut our transaction volume projections for the various segments.
Expecting steeper drop in private new home sales vs resale and HDB resale. For the new home sales segment, we cut our projection by 18% to 26% to 9,000/10,000 units for FY22F/23F. For the resale segment, we have penciled in a 6 to 10% cut to 15,000/16,000 and a 11-12% cut for the HDB resale division to 26,500/27,000 units.
Earnings could taper and move sideways in the next one to two years. We expect earnings to drop 33% in FY22F and rise by a modest 6% in FY23F.
Valuation:
Maintain HOLD with lower TP of S$0.67. We have reduced our TP to S$0.67 (previously S$0.88) pegged to c.10x FY22F earnings, equivalent to its average 4-year PE, on the back of the lower earnings as we cut our transaction volume assumptions. Prospective yield is decent at c. 5.7% – HOLD.
Where we differ:
We are more cautious on the outlook as we are expecting fewer new launches while inventory is depleting.
Key Risks to Our View:
Additional property cooling measures; outlook is dependent on Singapore’s residential property market and macroeconomic conditions.