Singapore’s property market is on the verge of an uptrend, according to Morgan Stanley. Analysts at Morgan Stanley expects Singapore’s property prices to climb by as much as eight percent in 2018. Along with other research houses, Morgan Stanley believes that developers’ valuations are attractive based on their current discount to net asset value.
While large-cap property stocks have outperformed, DBS feels that small-cap to mid-cap property stocks are still lagging behind. Given the multiple catalysts for residential prices to head higher in the next two years, DBS believes that investors should turn towards the small or mid-caps for better investment returns.
In this article, we highlight five hidden property jewels that DBS recommends adding to the portfolio.
Investors Takeaway: 5 Hidden Property Jewels On SGX
1. Keong Hong Holdings
Keong Hong Holdings is a construction-cum-property development and investment player that is riding on the potential upturn in the Singapore property market. To expand its portfolio, grow a sustainable source of cash flow and recurring income base, Keong Hong has also ventured into the hospitality and commercial segments. DBS highlights that Keong Hong is currently trading at an exceptionally low price-to-earnings (P/E) of only 4.3 times FY18 forecast earnings despite a healthy order book, making it deeply discounted compared to its peers.
2. Hong Fok Corporation
Hong Fok Corporation (Hong Fok) is an integrated property developer and investor, with a quality portfolio of commercial assets in downtown Singapore. DBS believes that Hong Fok’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is set to double post the opening of YOTEL Singapore Orchard in October 2017. DBS also foresees improvement in development sales for its “Concourse Skyline” and “Jewel of Balmoral” projects, on the back of the robust residential market in 2018.
3. Chip Eng Seng Corporation
Chip Eng Seng Corporation has over $1 billion in pre-sales waiting to be recognised in coming years. With upcoming launches in 2018 to 2019, DBS believes that the integrated property developer has strong capacity to leverage on the upcoming property upturn. Its growing investment and hotel portfolio also offers stability to strengthen its earnings profile. A prospective 4.2 percent yield and discount to revised net asset value places it in a good position for investors to ride on a property market upturn.
4. APAC Realty
APAC Realty is the true proxy to Singapore’s residential property volumes, given its operation as a property agency. ERA Realty, a wholly-owned subsidiary of APAC Realty, is one of Singapore’s largest real estate agencies with approximately 6,176 registered agents. With transaction volume forecasted to hit $40 billion in 2017 and $42 billion in 2018, APAC Realty is poised to deliver a robust 10 percent 2-year compound annual growth rate (CAGR) in its Earnings Per Share (EPS).
5. Lian Beng Group
Lian Beng Group (Lian Beng) is one of Singapore’s leading construction groups. Through successful forays into the complementary property development and property investment segments, Lian Beng has gained substantial scale and scope. Its current order book of some $836 million provides strong earnings visibility while upcoming sale launches in 2018 could help Lian Beng to surprise the market.
Lian Beng’s proposed spin-off of its property development business could help unlock value for shareholders in the near term. DBS notes that Lian Beng’s attractive exposure to Gaobeidian could provide further upside to its share price.