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MBKE: Buy High-End Property Developers For 10% Upside!
Aspire, Hot Picks | 09 April 2015
By: Vance Wong
Articles (74) Profile

Recently, two residential projects were launched and the response was surprisingly overwhelming, at least to Maybank Kim Eng (MBKE). However, MBKE is adopting a contrarian perspective on the property landscape right now, mainly because of the excess supply of mass-market properties.

Analysts' updates on Wing Tai and Ho Bee Land as at 09/04/2015

In view of the decreasing prices of the high-end properties, MBKE maintains a stance that the “artificially suppressed market” has a very high potential for policy easing. MBKE’s top two high-end property picks are Wing Tai and Ho Bee Land, with a potential upside of 12.3 percent and 21.7 percent respectively.

Be Cautious Of Unsold Mass Market Inventory

Unsold mass-market inventory

As can be seen from the graph above, the amount of unsold inventory in the mass-market is building up. With increasing supply, will demand pick up as well?

Comparable projects

If we were to use the two previously mentioned projects, the answer to the demand question is not so clear cut.

The two recent residential projects were priced rather aggressively, one of them being North Park Residences at Yishun and units were sold at a 24 percent premium, compared to the nearby projects. The main reason for this premium, according to MBKE, is the project’s close proximity to an MRT station.

The other project Botanique at Bartley did not do half as well despite units priced “largely in line” with nearby projects.

Nevertheless, MBKE is certain that the demand will start to diminish, considering the large number of unsold units around the two recent projects and the entire Singapore mass-market property landscape in general.

High-End Property Stock Picks

MBKE emphasises that the current pricing and uptakes “suggest that mass-market home prices remain sticky despite the impending supply surge.” With this in mind, MBKE feels that government policies concerning mass market residential properties will likely remain in place.

This is quite the opposite for high-end property prices. Prices in that segment have seen a significant fall and MBKE feels that the government could step in to help ensure that prices stabilise.

Such stabilisation policy measures could ultimately help bolster high-end property developers. This is quite possibly why MBKE is currently pretty bullish about the high-end property segment.

MBKE made two notable mentions of high-end property developers in its report, they are Wing Tai Holdings and Ho Bee Land.

MBKE maintains their “Buy” call for Wing Tai, with a target price of $2.37 with a potential upside of 12.3 percent. Ho Bee Land receives a “Buy” call as well, expected target price is $2.75, indicating a potential 21.7 percent upside.

Analysts Chart for Wing Tai Source: FactSet Fundamentals

Analyst Chart for Ho Bee Land Source: FactSet Fundamentals

As can be seen from the above two graphs, MBKE apparently are not the only ones who are bullish on those two stocks. With average target prices hovering at more than 10 percent above current prices, should retail investors take a look?

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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