Broker's take: Possible upward swing for Bukit Sembawang earns Maybank's 'buy'

BUKIT Sembawang, a Singapore-based property developer known for its luxury landed homes and condominiums, has been put on broker Maybank Kim Eng's radar with a "buy" rating at a target price of S$8.25, representing a 39 per cent upside from its current share price of S$5.93.

The stock has seen a 52-week high of S$6.90 and low of S$4.48, and major shareholders include the Lee Rubber family, Aberdeen Asset Management (Asia) and a GuocoLand unit.

Maybank views the residential developer, in operation since the 1950s, as nearing a cyclical earnings rebound during the 2019-2020 financial years, being a "concentrated proxy" for the Singapore property market.

The broker sees property developers raising home prices in 2018 on stronger homebuying sentiment to deplete unsold market inventory, and Bukit Sembawang's 1.1 million square feet of projects under development adds to the strength of the developer's stock since it is not under pressure to bid for more land.

"In particular, we believe a successful launch of 8 St Thomas is a potential catalyst to watch," the broker said, referring to a luxury condominium along River Valley Road, expected to be completed by the end of the year.

Despite poor corporate access, low stock liquidity and long development time for its land, Maybank believes the stock's attractive valuations make up for all those factors.

The developer counts Paterson Collection on Orchard Road, Watercove in Sembawang, and Luxus Hills and Nim Collection in Seletar Hills in its portfolio.

Possible downsides to the stock include the developer overpaying for land, poor execution of projects, an interest rate spike which could dampen demand for properties and drive down asset prices, as well as government policy tightening.