Friday 29 Mar 2024
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SINGAPORE (Oct 18): CIMB Securities and Credit Suisse are recommending City Developments Limited (CDL) as their top developer pick of the sector with target prices of S$8.75 and S$11.50 respectively.

While CIMB is highlighting the counter for its active capital recycling, low gearing as well as expectations of its overseas contributions from China and the UK to ramp up in 2H16F, Credit Suisse expects CDL to go through further asset monetisations to be the next catalyst and thinks its current valuations are attractive.   

This comes as both research houses note that Singapore’s property sector registered a 49% improvement in sales transaction volume for the month of Sept compared to a year ago. The latest data excludes executive condominium (EC) sales, which appears to have softened with a 10% y-o-y decline in sales instead.

In a Monday report, Credit Suisse analysts Louis Chua and Nicholas Teh say they are expecting the positive sales momentum to continue into the months of Oct and Nov, with CDL’s Forest Woods and MCC Land’s The Alps Residences receiving positive responses, and launches like that of EL Development’s Parc Riviera in West Coast Vale taking place next month.

However, the fact that an average of about 45% of 13 ECs remained unsold in September could weigh down on mass market prices for the outside central region (OCR), they caution.

Conversely, CIMB analysts Lock Mun Yee and Yeo Zhi Bin believe the property sector’s physical market may have “reached post-credit and policy tightening volume equilibrium”, as September’s sales volume for this year is now “relatively stable” at 9,199 units compared to 8,048 units in 9M15.

They also reckon high incoming supply for the second half of the year and 2017 will drag on occupancy rate such that prices will continue to slide downwards.

“The 3Q16 URA price index flash estimate showed that private home prices retraced by a steeper 1.5% qoq in 3Q16 versus the 0.4% decline in 2Q16. In addition, the rental market remains sluggish, putting pressure on investment demand,” add Lock and Yeo.

CIMB is remaining “overweight” on the property sector. Aside from CDL, the research house has also named developers UOL and CapitaLand as its top “add” picks with target prices of S$7.97 and S$4.17 respectively.

As at 11:40am, shares of CDL are trading 0.34% lower at S$8.75; UOL is up 0.53% at S$5.73; and CapitaLand is down 0.01% at S$3.11.

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