SINGAPORE (Mar 16): CIMB Research is keeping its “overweight” rating on the Singapore property sector, despite primary home sales volume tumbling 61% to 377 units in Feb 2018, from 469 units a year ago.

“We think this was largely due to the lack of new launches amid the [Chinese New Year] lull,” says analyst Lock Mun Yee in a report on Thursday. The Lunar New Year festivities fell in mid-February in 2018, compared to late-January last year.

“In our view, a more meaningful comparison would be the take-up rate, which stood firm at 2x in Feb, indicating still-healthy buying interest in the residential market,” Lock says.

Looking ahead, CIMB anticipates that the pace of new launches will pick up, with an expected launch of 10,000 units in 2018. At the same time, demand is forecast to reach 11,000-12,000 this year.

“We note that the Nim Collection landed project is being marketed now, while the 309-unit Margaret Ville and 861-unit The Tapestry are being sounded out for interest,” Lock says. “The rising pace of upcoming new launches could attract more buying interest in the market, amid an average 5% increase in private home prices.”

According to CIMB estimates, Singapore-listed property stocks are currently trading at a 35% discount to revalued net asset value (RNAV).

“With anticipated newsflow on upcoming new launches in the sector, we believe there is room for share price outperformance by property stocks,” Lock says.

Among the stocks in the sector, CIMB says it continues to rate UOL Group and City Developments as its top picks.

“In our view, [CityDev’s] land-restocking activity would enable the group to continue to ride the residential upcycle and underpin its RNAV expansion, while growing its new fee income platform could bolster ROE in the medium term,” Lock says.

She notes that the stock is now trading at a 21% discount to RNAV.

CIMB has an “add” call on CityDev, with a target price of $13.44.

As at 11.28am, shares of CityDev are trading 3 cents up at $13.41, implying an estimated price-to-earnings ratio of 22.1 times, a price-to-book ratio of 1.3 times, and a dividend yield of 1.4% for FY18.

Meanwhile, Lock likes UOL for its high recurring income base, which is underpinned by rentals, hotel operations and investment holdings. In addition, the analyst notes that it has good office exposure through UIC.

According to Lock, UOL is now trading at a 27% discount to RNAV.

CIMB has an “add” recommendation on UOL, with a target price of $9.67.

As at 11.28am, shares of UOL are trading 3 cents down at $8.76, implying an estimated price-to-earnings ratio of 17.2 times, a price-to-book ratio of 0.8 times, and a dividend yield of 2.0% for FY18.