CapitaLand shares have rebounded 17.3% in just ten weeks, after trading to a 21-month low on 20 March.  Its share price recovery appears to have coincided with that seen in the Singapore property market, based on the new home sales statistic for April. Macquarie Equities Research (MER) had released a research report on 15 May analysing the Singapore property market and counters, including April’s new home sales figures.

April’s new home sales rose 55% month-on-month (MoM), [-46% year-on-year (YoY)] to 745 units, reversing March’s -35%. Including executive condominiums (ECs), 793 units (+48% MoM, -49% YoY) were sold. The new home sales of 2,489 units over the four months of 2014 represent a YoY decline of 63%.
 
Impact
Only 2 new projects were launched, including top seller 696-unit Lakeville (210 units at S$1,108 psf; 30% take-up) and 131-unit The Sorrento (125 units at S$1,414 psf; 95% take-up). Sky Habitat was the other project which performed well (130 units at S$1,377 psf; 61% overall take-up), post its relaunch at a price discount of 10-15%.
 
Mid-end and mass market recovered, as sales in Rest of Central Region (RCR) and Outside Central Region (OCR) rose by a respective 87% MoM and 51% to 237 units and 535 units. Core Central Region (CCR) declined 61% to 21 units. OCR, RCR and CCR accounted for 67%, 30% and 3% of total sales, respectively. 9% of units were transacted below S$1,000 psf, with 83% (S$1,000-1,500 psf) and 8% (S$1,500-2,500 psf).
 
Secondary transactions rose 3% MoM to 415 units, representing the second consecutive month of increase after Mar 14’s +39%. Resale transactions were up 9% to 381 units, while subsale transactions were down 33% to 34 units.
 
MER cut their forecasted new home sales to 10,000 units (previously 14,000 units), due to 2 main reasons: (1) the government is unlikely to relax its existing cooling policies in the near-term and (2) continued price declines, albeit marginal, will prompt prospective buyers to adopt a wait-and-see approach. While developers appear to be expediting their launches, MER expects moderate initial take-up of 20-30% unless generous price discounts are offered. In May - June alone, there are potentially close to 5,000 units to be launched, giving buyers ample choices. Overall prices should fall 4%, underpinned by high-end (-5%), mid-end (-4%) and mass market (-3%).


Action and recommendation
In view of declining landbanks, narrowing pre-tax margins and price declines in 2014, MER prefers players with less Singapore residential exposure such as GLP and CapitaLand.
 
MER has an Outperform rating on CapitaLand with a 12-month target price of $4.09.

Source: Macquarie Research - 2 Jun 2014