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DBS: City Developments – Buy Target Price $10.50

Posted on October 20, 2022October 20, 2022 By alanyeo No Comments on DBS: City Developments – Buy Target Price $10.50
New uptown ECs to drive earnings

New uptown “EC” (girl)

City Developments Limited (“CDL”) – MCL Land’s Copen Grand, an executive condominium, a hybrid between public and private housing – was opened for preview on 7 Oct’22. E-applications closed on 17 Oct and booking of units is to start on 22 Oct, Saturday. This will be the first residential project launch after the recent government measures announced on 30 Sept’22.

A first mover advantage in a master-planned new town, within walking distance to three MRT stations.
Planting its first luxury executive condominium in the newest planned neighbourhood in Singapore, CDL / MCL Land is probably one of the first developers in recent years to launch a new project in Tengah. While there may be risks in starting in a new town, we believe there is infinite future potential for this new town. Tengah could be the new Punggol district, which has transformed into a new suburb bustling with affluent society and young and budding families.

Copen Grand will have 639 units across 12 blocks and will be located within the new 700-hectare new master-planned Tengah Town. Buyers will have a first mover advantage in this work-live-play precinct with the authorities planning to build over 42,000 new homes with offices and supporting amenities in the medium term. The project will be located within walking distance to three MRT stations on the upcoming Jurong Region Line – Tengah, Hong Kah, and Tengah Plantation.

Will the project see strong response? Based on market chatters, we understand that the show-flat received less than 10k visitors on the first weekend of opening and accepted a good traction of e-applications. We visited the showflat on a weekday and saw a very decent crowd constantly coming through. The crowd comprised of some young couples and young families. Our first impression of the show-flat was that it felt more like a private housing rather than an executive condominium. We believe that CDL / MCL has really upped the game of this executive condominium into a luxury condominium.

Pricing is in line with the market with decent sizes. According to marketing materials, Copen Grand will have units ranging from 807 sq. ft for a two-bedroom plus study to 1,722 sq. ft for a top-floor five-bedroom unit, with varying unit types to cater to needs from a young couple to families with kids. Pricing will range from S$1.08m (S$1,338psf) for a two-bedroom plus study, S$1.18m (S$1,260psf) to S$1.28m (S$1,279psf) for a three bedroom unit , S$1.48m (S$1,250psf) – S$1.58m (S$1,255psf) for a four-bedroom unit up to S$1.88m (S$1,189psf) for a five-bedroom premium unit.

Limited supply in the market to drive buyers to look closely at Copen Grand. The launch of the EC will be keenly watched given that it will provide the market how demand for homes may change post-recent new measures in the aim to curb the continued rise in property prices in the face of higher mortgage rates and economic uncertainties. That said, based on our estimates of the past four executive condominium (“EC”) launches in the past two years, most of the projects have already been fully sold, with only North Gaia (launch in Apr’22) still at c.29% sold as of end Sept’22, implying strong inherent demand from households for this hybrid public-private housing asset class. 

Next EC site at Bukit Batok expected to launch in 2023 /2024. CDL has recently been awarded a new Executive Condominium (“EC”) site at Bukit Batok Avenue 5 at S$626 psf ppr. We note that the pricing for pricing for the Bukit Batok Avenue 5 site is a c.5% tad lower than the tender price for a recent EC site that was awarded to Qingjian nearby in Bukit Batok West Avenue 8. Based on our estimates, CDL should be looking to price the EC at close to s$1,200 psf given estimated breakeven of between S$1,300 psf onwards.

City-Dev-Copen-Grand_18oct2022Click here to Download Full Report in PDF

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Research - Equities Tags:City Developments

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