SINGAPORE (Oct 2): CGS-CIMB Research is keeping its “neutral” stance on property developers amid slowing sales at new launches, following a slew of new property cooling measures introduced in July to curb rising home prices.

“As property stocks’ performance has historically shown a high correlation to take-up rates, the slower sell-through rates mean property stocks are likely to trade range bound in the near term,” says analyst Lock Mun Yee in a Monday report.

According to Lock, ongoing projects marketed over the past 2-3 months post the July cooling measures saw a slower take-up rate. But, she adds, these projects continued to garner consistent sales traction.

“Latest URA data showed that The Tre Ver, Affinity at Serangoon, Park Colonial, Stirling Residences and others saw inventory moving over the past 2 months, indicating that while there is no extreme pessimism, the market continues to find a new post-measure price equilibrium,” says Lock.

However, according to Lock, recent project launches such as Mayfair Gardens in Bukit Timah and The Jovell off Upper Changi Road saw conversion rates of only around 40%, based on the number of cheques collected in the lead-up to the launches.

Over 80 units were taken up at the launch of the 215-unit Mayfair Gardens last weekend, while the 428-unit The Jovell saw just 40 units changing hands.

In this climate, the brokerage prefers diversified developers with a high proportion of recurring income, such as City Developments, UOL Group, and Ho Bee Land.

CGS-CIMB has an “add” call on CityDev with a target price of $10.89.

“In addition to its residential activities, expansion of its fee and recurring income platform could bolster [CityDev’s] ROE in the medium term,” says Lock, noting that the stock is trading at a 46% discount to RNAV.

As at 3.07pm, shares in CityDev are trading 3 cents higher at $9.08.

Meanwhile, CGS-CIMB has an “add” recommendation on UOL Group with a target price of $8.45, on the back of its high recurring income base, supported by rentals, hotel operations and investment holdings.

UOL also has good office exposure through United Industrial Corp, Lock says, noting that UOL is trading at a 43% discount to RNAV.

As at 3.07pm, shares in UOL Group are trading 5 cents lower at $6.83.

Finally, CGS-CIMB has an “add” call on Ho Bee Land with a target price of $3.00.

Lock notes that Ho Bee derives 80-90% of its revenue from rental income from its office properties in Singapore and the UK, and is trading at a 49% discount to RNAV.

As at 3.07pm, shares in Ho Bee Land are trading 1 cent lower at $2.58.