Downgrade to HOLD With Lower Target Price of SGD10.40

• We downgrade CityDev to HOLD from BUY with a lower Target Price of SGD10.40, now based on a 25% discount to RNAV vs RNAV parity earlier.
• We cut RNAV by 2% to SGD13.91 after reducing our ASPs. We cut FY18-20E EPS by up to 11%. That said, we expect its diversified income to cushion headwinds in the residential segment.
• Stock is also trading close to 1SD below its 10-year average, which we think has priced in the near-term policy overhang.

De-facto Housing Proxy

CityDev is the de-facto proxy for the sector. With Singapore’s residential market accounting for one-third of its valuation, we expect the recent surprise policy tightening to weigh on its near-term performance.

Cut ASPs

With 5-10% increases in the ABSD for property investors, we expect developers to lower their ASPs to stimulate demand. We cut ASPs for CityDev’s high-end projects, such as South Beach, Cliveden, Handy Road site and Boulevard 88, by 10% to reflect the segment’s larger exposure to investment demand. We now assume SGD3,000 psf for South Beach and SGD2,350 psf for its Handy Road site.

Price cuts for the mid-to-mass-market segment are smaller at about 5% as we expect demand from owner occupiers to support prices. ASPs for West Coast Vale are now forecast at SGD1,330 psf while those for its Amber Park site are SGD2,230 psf.

Sector Report

• Singapore Property Sector : Back To Tightening Mode ~ Let The Dust Settle; Downgrade To NEUTRAL 

Other Property Developer Stocks

• Bukit Sembawang - Most Exposed To Singapore’s Residential Market

• Ho Bee Land (HOBEE) - Diversification Pays Off

• UOL Group Ltd - Oversold

• Oxley Holdings - Highly Exposed To Residential Headwinds

• CapitaLand - Small Exposure To SG Residential

• GuocoLand - Limited Upside

Source: Maybank Kim Eng Research - 06 Jul 2018