SINGAPORE (Dec 17): CGS-CIMB is keeping the Singapore property sector at “overweight” on the back of a 23% month-on-month increase in home sales recorded in November. 

In a flash note on Monday, the brokerage notes that November was an “active month” in terms of primary homes sales -  with some 1,148 units, excluding executive condominiums, changing hands over the course of the month. This translated into a sell-through rate of 1.55 times. 

According to analyst Lock Mun Yee, more than half of the sales came from city fringe projects, while suburban projects constituted another 30%. 

Specifically, the most popular projects included Sengkang Grand Residences, One Holland Village Residences and Parc Esta.

Year to date, sales have totalled to some 10,105 units, representing a 1% year-on-year increase, and is on the “higher end” of the brokerage’s expectations. 

Looking ahead, Lock expects transaction volumes to remain steady going into 2020, especially with an ample supply of launches in the pipeline. 

“According to the Urban Redevelopment Authority (URA) property price index, primary home prices ticked up 2.1% in 9M19,” shares Lock. 

“We think private residential prices would remain range bound in the near term given ample supply from new launches; as such, we retain our projection for a 0-5% price increase in 2020,” adds Lock. 

In particular, the brokerage has identified its top picks for the property sector - CapitaLand, City Developments (CDL) and UOL Group. 

According to Lock, all three stocks are trading at a discount to their respective revalued net asset value (RNAV) values, which signals an opportunity for investors to profit from their investments. CapitaLand and CDL are trading at a 42% discount to their RNAV figures, while UOL is trading at a 35% discount. 

Aside from their attractive valuations, Lock remains upbeat on CapitaLand’s recent asset recycling strategy. 

On Nov 1, the group announced its intention to divest 28 US campus properties and two business parks in Singapore to Ascendas REIT. This was followed by the divestment of The Star Vista for $296 million to Rock Productions, the business arm of New Creation Church. 

More recently on Nov 21, both CapitaLand and City Developments (CDL) announced redevelopment plans for the Liang Court site. 

“As Asia’s leading diversified real estate group, strong capital recycling and deployment into new investments would continue to drive return on equity (ROE),” says Lock.

For CDL, Lock hones in on the group’s recent land restocking activities, which are slated to “extend its residential earnings visibility.”

In particular, Lock notes that the group has taken efforts to expand its global footprint. “New investments in Europe and strategic investments in China would enable the group to deploy balance sheet capability,” adds Lock. 

For UOL, Lock opines that its high recurring income base is something worth noting. The group boasts a diversified portfolio supported by rentals, hotel operations and investment holdings. In addition, UOL has thus far garnered “good office exposure” through United Industrial Corporation (UIC) following a consolidation exercise which saw UOL obtain a 50% stake in UIC. 

Shares in CapitaLand closed one cent lower, or 0.3% down, at $3.67 while shares in CDL closed five cents lower, or 0.5% down, at $10.75 on Tuesday. Shares in UOL closed two cents lower, or 0.3% down, at $8.03.