SINGAPORE (June 16): CIMB is maintaining its “overweight” call on the property sector on the back of an upsurge of sales in May, with "buy" calls and target prices of $10.32 for City Developments (CDL), $8.26 for UOL Group and $4.07 for CapitaLand.

A total of 1,388 units were transacted (1,056 excluding Executive Condos) in the month of May. Excluding ECs, this represented a 41% spike in transactions on a month-on-month basis, or 66% if calculated on a year-on-year basis.

The sector is on track to reach CIMB’s forecast of 8,000-9,000 units sold in 2016, says lead analyst Lock Mun Yee in a Wednesday report.

Lock expects further downward corrections to private home prices due to financing restrictions and higher transaction costs that have increased supply and vacancies. Private home prices have corrected an average of 9.1% from its 2013 peak, with city fringe prices retracing 9.8% and suburb prices correcting 8% over the same period.

Moreover, developers facing Qualifying Certificate and Additional Buyers Stamp Duty penalties are starting to clear their unsold inventory. CIMB is projecting a resultant drag on selling prices and anticipates residential prices to correct by 5-8% this year.

Lock says CDL’s valuations are attractive as it is currently trading at 0.87x P/BV and has a low net gearing of 0.26x.

UOL, on the hand, has a high sturdy recurring income stream underpinned by its rentals, hotels and investment holdings.

Meanwhile, CapitaLand’s ROE-boosting capital recycling activities and current steep 42% discount to RNAV makes it an attractive valuation.

As at 3pm, CDL is down 0.7% at $8.71, UOL is down 0.37% at $5.41 and CapitaLand is down 1% at $2.96.