Highlighted Companies
Capitaland Investment ADD, TP S$4.59, S$3.83 close
Capitaland Investment (CLI) is one of the largest real estate investment managers in Asia. Growth in its funds under management and fee income, its efficient capital deployment, and improved operating performance of its investment and lodging properties would likely underpin its ROE expansion and share
price re-rating. The stock is trading at a 25% discount to RNAV.
City Developments ADD, TP S$8.97, S$8.45 close
In our view, City Developments’ (CIT) land restocking activities, with a potential launch pipeline of c.2,000 units, would extend the visibility of its residential earnings. Value-unlocking activities and
the nascent recovery of the global hospitality industry could catalyse its share price. The stock is trading at a 48% discount to RNAV.
UOL Group ADD, TP S$8.00, S$7.37 close
UOL Group has a high recurring income base, supported by rentals, hotel operations and investment holdings. It has good office exposure through Singapore Land Group (SLG SP, NR). UOL is now trading at a 45% discount to RNAV.
Boosted by AMO Residence
- Jul 22 (ex-EC) new home sales rose 71% mom, on good sales at AMO Residence.
- Private home sales for the first 7 months made up c.52% of our 2022F projections; we raise our home price forecast to +5-8% yoy for 2022F.
- We stay sector Overweight due to inexpensive valuations. Our sector top picks: CIT, CLI and UOL.
Jul home sales surge mom on good take-up at AMO Residence
? According to the Urban Redevelopment Authority (URA), Jul 22 monthly home sales in Singapore came in at 846 units. Excluding executive condos (ECs), private home sales amounted to 834 units (+71%% mom, -47.5% yoy). The mom surge in sales was due to the good take-up at AMO Residence, which accounted for 44% of Jul transaction activity.
? As a result, volume sales in the Outside Central Region (OCR) accounted for 58% of sales in Jul. Meanwhile, projects in the Core Central Region (CCR) took up another 22% of sales, with the more popular projects being Hyll on Holland and Perfect Ten. Take-up at city fringe accounted for the balance 20%.
Year-to-Jul sales at 52% of our 2022F volume expectations
? Meanwhile, according to Singapore Real Estate Exchange (SRX) data, private home resale volumes declined 6.7% mom in Jun 22 (-31% yoy), while HDB resale volume rose 11.3% mom (but 10.5% lower yoy) in the same month. With the latest data, new home sales (excluding ECs) for the first 7 months of 2022 totalled 5,218 units (-36% yoy). Accordingly, we maintain our primary home sales volume projection at 10,000 units for 2022F.
Raising our 2022F home price projections to +5-8%
? Based on SRX data, private resale home prices inched up by 1.2% mom in Jul 22, bringing YTD improvements to 5.4%. Meanwhile, HDB resale prices in Jul rose 0.7% mom and up 6.1% year-to-Jul. Based on URA residential price index, private home prices recorded a 3.5% qoq increase in 2Q, notching a 4.2% hike for 1H22. As such, we raise our 2022F private home price increase projection from 0-5% to 5-8% in 2022F.
Reiterate sector Overweight
? Developers’ valuations still look inexpensive to us, as they are trading at a 42% discount to RNAV, close to 1 s.d. below the long-term mean discount. We prefer developers with visible residential pipelines and strong balance sheets that would enable them to tap into any opportunity during this slower cycle. Our preferred picks are CIT, CLI and UOL.
? Potential sector re-rating catalysts: good sell-through rates for new launches. Downside risks: faster-than-expected interest rate hikes, slower economic outlook, and property cooling measures that could dampen demand for housing.
