Yahoo Finance 
CDL to benefit from improving market sentiment
CDL has the largest available land bank and unsold inventory, with an estimated 2,909 units worth $5.8 billion.
Improving sentiment in the housing market will likely benefit City Developments Limited (CDL), as it remains the developer with the most available inventory, with much of its land bank purchased at a lower cost in previous years, revealed a Credit Suisse report.
The report noted that the introduction of the final rounds of property cooling measures, including the Total Debt Servicing Ratio (TDSR) in 2013, saw transaction volumes drop 66 percent to 12,850 units in 2014 from 37,873 units in 2012.
“While transaction volumes remained tepid with declining prices a dampener on demand, we have observed a resurgence in volume growth across both the primary and secondary markets in recent quarters,” said Credit Suisse.
In fact, latest data for Q3 2016 showed that total sales volumes increased 10.5 percent year-on-year, on the back of strong resale volumes across all markets.
Resale volumes, which increased 53 percent year-on-year in Q3, would be a “better representation of buyer sentiment rather than total volumes, as they exclude the moderating impact on primary sales volumes from the decline in land sites in the market”, noted Credit Suisse.
The report stated that total unsold units (including completed, under construction and planned developments) have also progressively declined to an all-time low of 22,502 units.
With this, Credit Suisse expects the recovery in market sentiment to benefit CDL.
“Based on our proprietary analysis, CDL has the largest available land bank and unsold inventory, with an estimated 2,909 units worth $5.8 billion, half of which are located in the prime CCR region. Furthermore, much of these would have been acquired at a lower cost in earlier years, hence supportive of margins.”
The Swiss banking giant believes volumes are a more important driver of share price performance than prices per se, since they better reflect sentiment in the residential market.
“CDL remains one of the most direct and investable residential proxies in the Singapore market for investors, and we expect CDL to re-rate with gathering sales momentum,” it said.
“With $3.5 billion in funds AUM through three PPS deals thus far, we expect further PPS initiatives to drive value creation, on track to meet its $5 billion target by 2018. This would serve as share price catalysts to drive a further narrowing of its current discount to NAV.
“At 0.85x P/B (-1 SD from historical averages) and a 31 percent discount to RNAV (-0.9 SD from the historical average), valuations remain attractive.”
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
