CFA Society Singapore
SINGAPORE (April 19): DBS Vickers Securities believes investor euphoria over Singapore’s March new private home sales figures, which was recently reported to have risen 111% to a record 1,780 units – the highest since property prices peaked in June 2013 – is bound to fade in the months or even weeks ahead.
“Given the strong March new home sales figure, we see no reason why the Singapore government should announce further easing of property measures anytime soon, especially those targeted at buyers such as additional buyers’ stamp duty (ABSD) or loan-to-value (LTV) limits,” explains analyst Yeo Kee Yan in a Wednesday report.
Yeo emphasises that the strong figures were well-anticipated given the recent government relaxation of seller stamp duties (SSD), which resulted in potential buyers becoming more willing to commit to an investment purchase given the reduction of their “holding period” from four years, to three.
Nonetheless, DBS maintains the view that Singapore’s property market is in a bottoming-out process this year, led by the luxury market, and is a process which takes time.
Noting that Singapore developers have re-rated to the post global financial crisis (GFC) mean of 0.86x P/NAV, Yeo recommends that short-term traders remain watchful of profit taking in the near-term following the YTD run-up in stock prices.
“Investors with a mid-term horizon should look to buy on the anticipated short-term consolidation. Watch the property transactions, which should underpin property stocks on pullback if the figure remains strong going forward,” advises the analyst.
“The first two months’ primary sales (pre-property relaxation) were 61% higher y-o-y, suggesting good positive momentum, which bodes well for the sector in general,” he adds.
The research house’s top “buy” picks are namely UOL Group and Frasers Centrepoint Limited (FCL) with respective target prices of $7.64 and $2.
UOL was last highlighted by DBS in Feb as one of the cheapest landlords in Singapore, while Frasers Centrepoint was flagged earlier this month as a growing developer with one of the high dividend yields among its peers.
“For CapitaLand, we see a pullback to $3.58 followed by $3.47,” adds the analyst. The counter has been rated “buy” with a $3.85 price target.
Shares of UOL, FCL and CapitaLand closed at $6.99, $1.88 and $3.64 respectively.