Singapore residential prices are on the rise with a 0.5% quarter-on-quarter (qoq) increase based on URA’s 3Q2017 report.
The price increase has led to a resurgence in a trend of enbloc in Singapore.
This has given the market a basis to relook at the property developers and determine, which of the companies are a good buy.
1. UOL Group
As property prices gained traction, UOL’s 45 Amber Road and Raintree Gardens are poised to gain from the escalating land costs in their vicinity.
UOL is expected to raise their Average Selling Price for these properties to maximise returns and to make up for the higher cost of its new inventory.
Compared to its peers, UOL has managed to acquired properties at a cheap price in late 2016; namely Botanique at Bartley and Raintree Gardens.
Recently, it has announced its success in bidding for Nanak Mansions, which they are part of a 50% joint venture with Kheng Leong.
Kheng Leong is the private investment vehicle of Wee family and it owns a major stake in UOL.
UOL has completed the share swap with Har Par which saw UOL’s ownership in UIC to increase to 48.9%.
Due to local regulations, UOL will not be able to acquire more than 1% of UIC’s shares every six months without triggering a general office for UIC.
Only after UOL’s stake in UIC crosses 50%, they will be able to freely acquire without triggering a buyout. A 50% stake held by UOL will also give it statutory control of UIC and its properties.
Analysts from Maybank Kim Eng Research gave UOL Group Limited (SGX: U14) a “Buy” call with a target price of $9.80.
2. City Developments
With a strong exposure to Singapore’s residential property market, City Developments is one of the top proxies to ride on the comeback of the property market.
It is exposed to various segments of the market from high-end to the mass market.
Two high-end projects, New Futura and South Beach Residences are ready to launch and reap from the current strong interest.
In the mid to mass market, there are over 600 unsold units from previous projects. This is in addition to two legacy sites in Upper Changi Road and Tampines Ave 10.
Its recent successful bid for Amber Park shows their ability to continuously grow its land bank. The property will be redeveloped into an 800-unit luxury condominium.
The project is expected to be profitable as the market rebounds. City Developments holds an 80% stake in the project while Hong Leong Group holds the remaining 20%.
Analysts from Maybank Kim Eng Research gave City Developments Limited (SGX: C09) a “Buy” call with a target price of $13.60.
The Singapore market continues to grow and hold a higher percentage of the valuations of GuocoLand in view of its recent developments.
Winning the Beach Road site, GuocoLand will be able to build a mixed development of residential, retail and office property. With the impending recovery of Singapore’s office segment, GuocoLand is poised to capitalise on it.
Looking at its balance sheet, GuocoLand is sitting on a comfortable gearing ratio.
That will eliminate fears from the street that the Beach Road site will force GuocoLand to hold a round of equity-based fundraising.
In addition, it is even more viable for GuocoLand to spin off their own REIT as an effective way of capital recycling.
Key risks remain for GuocoLand includes overpaying for the sites and poor execution of development projects. If the office sector fails to recover, the Beach Road site will be a drag on the company instead.
Analysts from Maybank Kim Eng Research reiterated their “Buy” call for GuocoLand Limited (SGX: F17) with a target price of $2.90.