SINGAPORE (June 25): CGS-CIMB is maintaining the property and development sector at “overweight” with CapitaLand, City Developments, and UOL as top picks after a total of 12 land sites were released by the government land sale programme (GLS) for 2H20.

“Developers’ valuations are attractive, trading at 54% discount to RNAV, close to the -2 standard deviation (s.d.) discount to long term mean,” says analyst Lock Mun Yee in a note dated June 24.

“Our strategy for developers would be to prefer those with high recurring cashflow base and strong balance sheets that would enable them to tap any opportunities during this slower cycle,” she adds.

The sites released by the GLS include 6,670 residential units, 101,500 sqm gross floor area (GFA) of commercial space, and 1,070 hotel rooms. Of the 12 sites, four are new offerings.

The confirmed list of sites will be launched in 4Q20, each with a longer tender period of about six months to give developers more time to make their assessment in view of the ongoing Covid-19 situation.

This is the second consecutive year that land supply for residential units remains below 15,000 units per annum.

“We see this moderated land sale programme as positive for the sector as it allows the market to assess the impact of Covid-19 on the sector and also to digest the anticipated large number of new launches scheduled to be rolled out this year,” says Lock.

The number of unsold inventory have been declining since 3Q18, which should help boost private home prices in the longer run.

According to the Urban Redevelopment Authority (URA), there are about 48,868 private housing units in the pipeline at end-1Q20, including 29,149 unsold units. There were another 1,950 executive condominium (EC) units that remained unsold in the same quarter.

As at 12.13pm, shares in CapitaLand were changing hands 5 cents lower, or 1.7% down, at $2.85; shares in CityDev were changing hands 18 cents lower, or 2.1% down, at $8.41; and shares in UOL were changing hands 19 cents lower, or 2.7% down, at $6.81.