Broker’s take: CGS-CIMB reiterates ‘overweight’ on Singapore property plays following H2 GLS programme release

CGS-CIMB listed CapitaLand Investment (CLI), City Developments Ltd (CDL) and UOL Group under its preferred picks for Singapore’s property sector on Wednesday (Jun 8). The brokerage also reiterated its “overweight” rating on the sector’s valuations following Tuesday’s release of H2 2022’s Government Land Sale (GLS) programme.

According to CGS-CIMB, the slate of 14 sites - which is 12.5 per cent higher than that in H1 -  were released as the government sought to address the dwindling unsold inventory situation.

“While the overall residential land supply earmarked under the H2 2022 GLS is the highest level since end-2018, it is still below the average supply over the past 10 years of 9,000 units,” said analyst Lock Mun Yee.

Taking into account uncertainties such as rising interest rates and slower economic growth outlook, she noted that the increase in land supply will likely enable developers to replenish their landholdings and extend their development income visibility.

CGS-CIMB added that the URA property price index recorded a 0.7 per cent quarterly improvement for Q1 2022, supported by a 2.2 per cent price hike for outside of central region properties. The brokerage maintained its expectation that private home prices will rise by up to 5 per cent for the whole of 2022.

It estimated that developers’ valuations are trading at a 42 per cent discount to their Revalued Net Asset Value (RNAV), close to 1 standard deviation below the long-term mean discount.

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Lock also maintained CGS-CIMB’s “add” calls and target prices on the 3 highlighted companies.

She expects to see growth in funds under management, efficient capital deployment and improved operating performance to underpin CLI’s : 9CI 0% return on equity expansion. Lock calculated that the stock is trading at a 24 per cent discount to RNAV and maintained its target price of S$4.59.

CGS-CIMB also expects CDL’s : C09 0% land restocking activities to extend its residential earnings, and estimated that the stock is trading at a 49 per cent discount. The brokerage’s target price for CDL is S$8.97.

Meanwhile, UOL’s : U14 0% high recurring income base, supported by rentals, hotel operations and investment holdings, puts the company’s target price at S$8. CGS-CIMB estimated that the stock is trading at a 45 per cent discount.

As at 4.39pm, shares of CDL were trading 0.36 per cent or 3 Singapore cents higher at S$8.29, while shares of CLI and UOL traded lower at S$3.86 (down 0.5 per cent or 2 cents) and S$7.32 (down 0.4 per cent or 3 cents) respectively.