More property privatisations to come?

THE proposed privatisation of Singapore Land by parent United Industrial Corporation throws the spotlight on the depressed residential property development segment. While residential prices here have not corrected by that much, many developers have been steadily sold down in the past year, in anticipation of a market downturn.

As SingLand gets taken private at an 11 per cent premium to its last traded share price on Feb 19 (inclusive of dividends), investors may very well ask which company comes next. A number of property development companies are trading at sizeable discounts to their stated values, but only a few may have upside catalysts by being privatisation candidates.

Developer profits tend to be lumpy, so a key metric to examine is either the net asset value (NAV) of a company, or its revised net asset value (RNAV) - essentially an analyst's estimate of the company's worth after taking into account properties held at cost that should be revalued to market prices - and the present value of future development profits, with liabilities subtracted.