Developer stocks may increase by up to 15 percent

After witnessing a good run in 2017 on expected property market recovery, developers who can turn anticipation to reality with higher selling prices and strong property sales will enjoy further re-rating, reported Business Times.

As such, analysts favour property counters that are supported by a robust line-up of new launches.

Derek Tan, senior vice-president for group equity research at DBS, expects developer stocks to increase by at least 10 to 15 percent.

“2018 is all about execution,” said Tan. “Developers will have to deliver on market expectations that the strong rebound in transaction volumes will continue in 2018, translating into strong take-up rates for upcoming new launches.”

JPMorgan property analyst Brandon Lee, who also expect a re-rating of some property stocks in 2018, believes that the risk of an immediate profit-taking is low considering that the property market is still in the nascent stage of a potential three-year upswing.

With this, most analysts see UOL Group and City Developments (CDL) as among the best large-cap proxies to ride the looming market ascent given their sizeable residential landbank in Singapore and decent exposure to the city-state’s office sector, which is also experiencing an upcycle.

DBS Group Research’s top picks include Frasers Centrepoint as well as small-cap developer Roxy-Pacific. Having land-banked ahead of its peers, the latter has seven freehold residential projects that are ready for launch in 2018.

RHB Research analyst Vijay Natarajan, on the other hand, favours the small-mid cap space in which stocks are trading at relatively higher discounts of between 30 and 50 percent.

“We believe the best way to play the recovery is a volume-driven play,” he said. “We expect the property transaction numbers (in primary and secondary markets) to remain strong irrespective of price movements as developers are bound by ABSD timelines to launch and sell their units. Thus, our top pick is APAC Realty.”

 

This article was edited by Keshia Faculin.