Property was the talk of the town, as HDB launched nearly 7,000 Build-To-Order (BTO) and Sale-Of-Balance flats in its May sales exercise. Up for grabs during this May BTO Exercise included flats from both mature and non-mature neighbourhoods, which spanned Toa Payoh, Tampines, Sengkang and Yishun.
The real estate fever was also seen in the private home sector, with news that a single Balmoral Gardens condominium unit sold for $9.17 million profit, returning an eye-popping 524% profit for the seller who bought the unit in November 2002.
The total value of properties that completed en-blocs has already surpassed 2017’s total collective sales. This is projected to rise on the back of stronger than expected GDP growth of 4.4% for Q1 2018, which prompted the Ministry of Trade and Industry (MTI) to revise full-year growth projections from between 1.5% and 3.5% to between 2.5% and 3.5%.
Colliers International reported in January that average home prices were expected to rise by 17% by 2021, and projected property investment sales in Singapore would continue to surge by 15% to $46 billion in 2018, before continuing to grow between 5% to 10% in 2019.
For this week’s edition of 4 Stocks This Week, we will analyse four of the largest property companies listed on the SGX.
CapitaLand Limited (SGX: C31)
CapitaLand made headlines in February when it bought the historic Pearl Bank Apartments for $728 million. The successive en bloc came after three previously unsuccessful attempts in 2007, 2008 and 2011 respectively, amidst growing competition over residential land parcels.
With the loss of a one-off gain of $160.9 million in Q1 2017 from the sale of The Nassim, net profit fell 18.8% to $319.1 million. If the one-off gain from the sale of The Nassim is excluded, net operating profit for Q1 2018 jumped 25% or $45.8 million, to $228.7 million.
This increase in operating profit was driven mainly by stronger development profits in Singapore and higher rental income from newly acquired overseas office and retail properties in China, Japan and Germany.
Overall, CapitaLand attained higher turnover, as group revenue ballooned by 53.3%, or $478 million, to $1.38 billion. CapitaLand is expected to launch 5,725 units in China between Q2 2018 and Q4 2018, which is projected to add significantly to gross sales and revenue over the coming months.
With a current market cap of $15.2 billion, CapitaLand closed at $3.55 per share this week.
Yanlord Land Group Limited (SGX: Z25)
Yanlord Land is a China-based real estate developer, which primarily focuses on high-end residential, commercial and integrated properties in strategically selected high-growth Chinese cities.
In April, Yanlord Land broke into the Singapore residential market for the first time, through entering into a joint venture with Hongkong Land subsidiary MCL Land. A joint entity by both companies secured freehold condominium Tulip Garden for $906.9 million, which is Singapore’s second-largest collective sale so far in 2018.
Yanlord Land also received greater confidence from credit rating agency Standard & Poor’s (S&P) Global Ratings, who revised its long-term corporate credit rating from BB- to BB, while simultaneously improving its long-term issue rating from BB- to B+. This arose with expectations that Yanlord Land will exercise restraint in its debt-fuelled expansion over the next two years.
Yanlord Land is the best-performing share listed in the STI Real Estate Index so far in 2018, returning 11.1% year-to-date (YTD). Total returns over the last 3 years clocked in at 47%, higher than the other stocks on record.
With a current market cap of $3.31 billion, Yanlord Land closed at $1.70 per share this week.
Hongkong Land Holdings Limited (SGX: H78)
Hongkong Land is a property investment, management and development group with residential and commercial developments across Hong Kong, Singapore, China and other parts of Asia.
In March, Hongkong Land recorded a 67% growth in net profit to US$5.59 billion for the year ended 31 December 2017. This was in part due to substantial one-off fair value gains of US$4.67 billion in 2017, which arose from revaluation of its investment properties
Additionally, Hongkong Land attained a 14% year-on-year (YOY) increase in underlying net profit, to a record high of US$970 million for 2017, while revenue slipped by 2% to US$2 billion.
In March, Malaysia’s IOI Properties ceased an agreement with Hongkong Land to jointly develop and manage a mixed-use development in Singapore’s Central Business District (CBD). This did not appear to faze investors, as Hongkong Land has continued to arrive at returns of 4.9% YTD, which was above the industry average of 3.9%.
With a current market cap of US$17.1 billion (S$22.8 billion), Hongkong Land closed at US$7.26 (S$9.74) per share this week.
United Engineers Limited (SGX: U04)
United Engineers (UEL) is a company whose interests span property, hospitality, engineering, distribution, and manufacturing. UEL has developed numerous buildings which dominate the Singapore skyline, including orchardgateway, UE Square, and the mixed-use Rochester developments situated at One-North.
Earlier this month, UEL reported a 3% rise in net profit to $9 million for Q1 2018, compared to $8.7 million in Q1 2017. UEL recorded a 1% decline in revenue to $105.2 million, as revenue from the group’s Property Rental & Hospitality, Property Development and Manufacturing divisions fell. However, operating expenses including distribution costs and finance costs declined sharply by 10% and 15% respectively.
UEL is the second best-performing share listed in the STI Real Estate Index so far in 2018, returning 8.4% total returns YTD.
Banking on the continued recovery of Singapore’s property market, UEL intends to commence asset enhancement initiatives for its investment properties in Singapore where opportunities arise.
With a current market cap of $1.79 billion, United Engineers closed at $2.81 per share this week.
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