Undervalued property developers: are they worth a second look?

A NUMBER of property developers are trading at undemanding valuations. With some sitting on land parcels, while others are poised to launch residential projects, could they be worth another look?

While Singapore continues to work at taming the pandemic, the residential property market has proven fairly resilient, thanks partly to low interest rates and demand from HDB upgraders, among other factors. In fact, with unsold inventory dwindling, some developers are already looking to replenish their landbank.

In March, new private home sales doubled month-on-month to 1,296 units, with F17's 99-year leasehold project Midtown Modern at Tan Quee Lan Street emerging among the top-selling projects for the month as about two-thirds of the 558 units were snapped up.

Tuan Sing Holdings is one of the developers expected to launch a residential project, Peak Residence, in H1 2021.

DBS Group Research analysts Woon Bing Yong and Derek Tan highlighted in a research report on Wednesday that T24 's share price could be bolstered by a successful sales launch of the freehold, 90-unit development on Thomson Road. They went on to add: "Apart from improved office fundamentals and the upcoming launch of projects in Opus Bay, the potential IPO (initial public offering) of (associated company) GulTech could further unlock value for shareholders."

DBS' price target of of S$0.54 represents a price-to-book ratio (P/B) of 0.55, compared to its existing P/B of about 0.42 and 0.51 for its peers. Shares in Tuan Sing closed at S$0.43 on Wednesday, up 2.5 cents or 6.17 per cent.

Indonesia's new omnibus law could also help serve as a boost for its Opus Bay project in Batam, which is a 125 hectare integrated, mixed development township. 51 villas and 381 residential units have been launched for sale under Phase 1.

The performance of Tuan Sing's hotels investment business, however, could be affected by any potential resurgence of Covid-19 cases in Australia.

Meanwhile, Ho Bee Land is sitting on five land sites in Australia, which will yield nearly 1,900 units in total. Aside from its development projects, it also has a steady stream of recurring income from investment properties to count on, with rental income comprising the bulk of its S$215.68 million revenue for FY2020.

In Singapore, H13 was awarded a tender last year to build, own and operate a mixed-use biomedical sciences development in one-north, with a gross floor area of 445,258 square feet: 85 per cent will be developed as biomedical facilities and the remaining 15 per cent, for offices and food and beverage.

This could give an additional lift to its rental income when it is slated to come onstream in 2022.

Other developers with residential exposure could stand to benefit from the ongoing residential upcycle. Frasers Property, for instance, is aiming to launch its executive condominium, the 496-unit Parc Greenwich, at Fernvale Lane in the third quarter of this year.

TQ5 is also mulling over redeveloping Bedok Point into a residential development with retail units on the ground floor. Bedok Point was acquired from Frasers Centrepoint Trust for S$108 million last year.

As borders are still largely shut to tourists, Singapore residents presently account for the bulk of private home purchases.

The eventual, gradual lifting of border curbs - starting with low-risk cities such as Hong Kong - should give the private residential market a shot in the arm, especially the high-end segment of the market.

Still, it's also worth keeping in mind that the risk of cooling measures remain, and should they materialise, could weigh on the share price of residential property developers in the near-term.

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