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Analysts: Focus On Developers With Overseas Exposure
Aspire, Hot Picks | 02 February 2015
By: Raymond Leung
Articles (142) Profile

Analysts' updates on selected developers

For 2014, sales for Singaporean developers remain low as new private home sales reached a new low since 2008. The total new private apartment units sold amounted to 7,500 (excluding ECs) which is an approximate 49 percent fall year on year (YoY).

December 2014 ended quietly as sales remained similar to the rest of the year. Developers only sold 230 units (excluding ECs) in the month leaving cumulative unsold units of 6,818 (excluding ECs). Analysts from research houses expect developers to concentrate in clearing the existing units under them rather than launching new developments.

2015 is expected to be a quiet year for residential properties with The Terrace the only development expected to come online.

We tend to agree to this stance as no notable developments are expected in 2015 with the exception of The Terrace, an EC in Punggol. In 2014, analysts saw strong interest in the EC following the launch of properties like Bellewaters, Waterwoords and Skypark Residences.

The property market is expected to remain quiet in 2015 as the demand for new units remain slow with current government curbs. Analysts’ forecasts expect the sales of new units to be in the range of 8,000 to 9,000.

Analysts anticipate that land-banking (or the purchase of land from the government) will continue to be selective as major developers such as City Development has publicly announced that it will not be making land acquisition in the near term due to high land prices.

Furthermore, a huge supply of private apartment units are expected to flow into the market as 2015 is the completion date for many projects. Developers are expected to face higher competition in the resale market which will increase their difficulty in selling new units in 2015.

Analysts expect property prices to dip by another 15 percent in 2015 as supply surges from the resale market.

However, it is not all that bad for Singapore developers as other aspects of local developers might have been overlooked by investors. Commercial properties continue to remain firm despite the weakening residential sector.

In addition, we note that Singapore developers have been diversifying into overseas markets over the years. This has over time, reduced their reliance on the local property market. A plus point, according to various analysts.

CapitaLand: Preferred Buy With Diversified Portfolios
As with most analysts, we prefer larger property developers that have a diversified portfolio of commercial properties and overseas exposure. CapitaLand is one of the preferred companies as they own a large portfolio of commercial properties with a significant percentage of the properties being overseas.

CapitaLand's acquisition of CMA gives it more exposure to the retail and commercial sector

Since 2010s, CapitaLand have been aggressively expanding overseas with a focus in China. Last year, CapitaLand took down its subsidiary, CapitaMalls Asia (CMA) from SGX.

This has increased the group’s overall exposure in commercial properties locally and internationally as CMA has a strong presence in major cities in China. A potential upside might be from unlocking of value through the continuing sale of properties to its REITs.

Frasers Centrepoint: Australand To Be Key In Unlocking Value
Frasers Centrepoint has also made its mark with its strong presence in the commercial and hospitality sector. They are one of the largest retail mall owner and operator in Singapore with serviced residences and hotels globally. Furthermore, Frasers Centrepoint is the sponsor for three REITs namely Frasers Centrepoint Trust, Frasers Hospitality Trust and Frasers Commercial Trust.

This will allow the group to efficiently recycle its capital and invest it in other areas while remaining invested in the previous properties. An upside may come from the spin-off of a REIT from the recently acquired Australand.

Being one of the largest developer and owner in multiple segments in Australia, the company owns many properties. The value of such properties will be unlocked if they are able to be sold to a REIT with a focus in Australian properties when the market turnarounds.

Overall, it is not all that bad for Singapore developers that are well diversified.

Investors need to be prudent in their selection and limit it to bigger firms that have stronger and more diversified portfolios which includes overseas properties. Smaller firms that are restricted to local properties especially residential segment should be avoided.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

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