After 3 years of hard times, the property sector in Singapore has finally gained some traction this year. According to Urban Development Authority (URA) of Singapore, the private residential property index for 3Q2017 has increased by 0.5 percent. It was the first increase that could be seen after 15 straight quarters of decline in the property market.
Property development companies with launch-ready projects that could be rolled out in the next 12 months are expected to ride on the market upswing with improving demand. Hereby, I shortlisted 3 property development company that would have a bright prospect in the near future.
It is an international property developer with a diversified portfolio, including property development, property investment and project management. Headquartered in Singapore, Oxley Holdings has its business presence across 12 geographical markets such as Singapore, UK, Ireland, Australia, Cambodia, Malaysia, Indonesia, China, Japan and Myanmar. Oxley has stakes in reputable companies such as Galliard Group (UK), Pindan Group (Australia) and United Engineers (Singapore).
Oxley is one of the key beneficiaries of Singapore property recovery. It currently holds the biggest residential land bank in Singapore by the number of dwelling units at almost 4,000 units, according to an article from Business Times. In total, Oxley has a land bank of approximately 3,800 units with an estimated GDV of $5 billion. Inclusive of Verandah Residences, Oxley targets to launch up to 7 projects in Singapore in 2018 to take advantage of the ongoing recovery in the housing market. Besides, Oxley has a quick turnaround time for its project. The Verandah Residences is an example, which Oxley has taken a mere eight months from site acquisition to launch the project in April 2018. Furthermore, Oxley intends to launch more projects such as Rio Casa and Serangoon Ville sites in the next few months.
(Source: Internal Calculation)
As at Dec 2017, the company has a long-term debt of S$ 2.276 billion and a short-term debt of S$ 270 million. With a shareholders’ equity of S$ 1.2 billion, the company has a total debt to equity ratio of around 2.1, which is extremely high when compared to other property development companies. However, the figures are declining gradually from 2014 to 2017.
As of 20/4/2018, the company is trading at PE and PB of 8.82 and 1.66 respectively. It has a market cap of S$ 1.95 billion.
Bukit Sembawang Estates
Bukit Sembawang Estates Limited (Bukit Sembawang) was incorporated in Singapore in 1967 and was one of the pioneer companies that obtained a public listing on SGX Mainboard in 1968. It is one of the pioneer property development companies that has built numerous homes in Singapore including houses in Seletar Hills and Sembawang Hills. The group is referred to as an “old hand” in the property development sector and has not been in the spotlight for the past ten years. Recently, the company has successfully tendered 2 en bloc sales in March, which are Katong Park Towers and Makeway View
Katong Park Towers
Katong Park Towers was acquired by Bukit Sembawang Estates with S$ 345 million. The purchase price translates to S$ 1,280 psf per plot ratio after factoring in S$ 60 million lease upgrading premium. Katong Park Tower can be redeveloped into a new residential development with a plot ratio of 2.1 and a maximum building height of 24 storeys. The property is strategically located about 200m from the future Katong Park MRT station, which is expected to complete in 2023. Bukit Sembawang is expected to launch to project before the completion of MRT and contribute to earnings from FY21 onwards.
Bukit Sembawang Estates has won the tender with a $168 million bid. This translates into $1626 per square foot per plot ratio, including the development charges of $21.26 million. Bukit Sembawang intends to redevelop the area into residential apartments with communal facilities. The main attraction for this project is its location. The property is located across from the Newton Food Centre and surrounded by renowned schools including Anglo-Chinese School (Barker), Anglo-Chinese School (Junior) and St Joseph’s Institution Junior. According to DBS’ estimates, the break-even value is hovering around $2,000 psf, so investors can expect that the project would launch units at about $2,300 psf or more.
A strong balance sheet is one of a key strength for Bukit Sembawang Estates. It has a track record of standing at net cash position for the past few years. As at December 2017, Bukit Sembawang has incurred zero long term and short term debt, resulting in a net cash of S$ 227 million. The company is too conservative in financing its business operations. Having a little leverage on debt is a good way to improve shareholders’ return.
As of 20/4/2018, Bukit Sembawang has a market cap of S$ 1.6 billion. It is trading at PE and PB of 44.3 and 1.27 respectively.
City Development Ltd (CDL)
City Developments Limited (CDL) is a leading global real estate operating company with a network spanning 100 locations in 28 countries. Listed on the Singapore Exchange, the Group is one of the largest companies by market capitalisation. Its income-stable and geographically-diverse portfolio comprise residences, offices, hotels, serviced apartments, integrated developments and shopping malls. Its diversified land bank offers a solid development pipeline in Singapore as well as its key overseas markets of China, UK, Japan and Australia.
According to DBS, CDL’s inventory gross development value is around S$4 billion. It is the undisputed leader in the Singapore residential market. The group has been actively land-banking since early 2017. Holding on to Singapore’s largest land bank on its books, the group is well positioned to leverage on the residential upcycle. City Developments currently has around 2,750 units in the pipeline from un-launched residential projects across suburban, mid-end and luxury-end segments.
(Source: Internal Calculation)
As at Dec 2017, City Development reported a long-term debt of S$ 3.8 billion and a short-term debt of S$1.3 billion. With a shareholders’ equity of S$ 9.6 billion, the company has a total debt to equity ratio of 0.54. City Development has decreased its total debt to equity ratio from 0.83 in 2014 to 0.54 in 2017, which is a good sign.
City Development has a market cap of S$ 11 billion as of 20 April 2018. It was trading at PE and PB of 23 and 1.26 respectively. Historically, City Developments has traded up to 1.2-1.3 times the price-to-book value.