Asia Pacific Equity Research | Singapore

MARKET

PULSE

Morning Call 3 Apr 2018

Key Idea Singapore Residential Sector: Momentum garnering strength Based on URA's flash estimates released yesterday, Singapore's private residential property price index grew 3.1% QoQ in 1Q18 (transactions up till mid-Mar). This was the third consecutive quarter of sequential growth and also represents the highest QoQ increase since 2Q10 (+5.3%). We deem this as a strong set of numbers as we were previously projecting residential prices to grow 3% - 8% this year. We now expect the full-year growth figure to come in at the upper-end of our forecast or even potentially exceeding it. As a breakdown, prices of non-landed private residential properties jumped 5.0% QoQ in Core Central Region (CCR); prices in Outside Central Region (OCR) rose 3.8% while prices in the Rest of Central Region (RCR) increased by 1.1%. We view sector valuations as compelling and maintain OVERWEIGHT on the Singapore residential sector. Our top picks are City Developments Limited [BUY, FV: S$15.91], UOL Group Limited [BUY, FV: S$10.63] and CapitaLand Limited [BUY, FV: S$4.26]. News Headlines  Far East Hospitality Trust has completed the acquisition of Oasia Hotel Downtown on 2 Apr 2018.  ASTI Holdings Limited has entered into a SPA in relation to the disposal of the entire issued and paid-up share capital of several wholly-owned subsidiaries for a total consideration of S$90m.  Tianjin Zhong Xin Pharmaceutical Group Corporation Limited’s FY17 revenue fell 9% to RMB 5.7b while PATMI rose 12% to RMB 476.1m.  Charisma Energy Services Limited has entered into a SPA and an addendum for the purchase of target companies that hold 12 power purchase agreements to operate 12 mini hydropower plants in South Asia for US$1.875m.

Research Team (65) 6818 4815 e-mail: [email protected]

Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

Please refer to important disclosures at the back of this document.

MCI (P) 005/06/2017

OCBC Investment Research Market Pulse 3 Apr 2018

Singapore Residential Sector: Momentum garnering strength  Strongest growth since 2Q10  Buyer sentiment to remain firm  Top picks: CDL, UOL and CAPL 3.1% QoQ growth in 1Q18 URA flash estimates Based on URA's flash estimates released yesterday, Singapore's private residential property price index grew 3.1% QoQ in 1Q18 (transactions up till mid-Mar). This compares to the 0.8% QoQ increase registered in 4Q17 and was the third consecutive quarter of sequential growth. We deem this as a strong set of numbers as we were previously projecting residential prices to grow 3% - 8% this year, while 1Q18’s flash estimates also represent the highest QoQ increase since 2Q10 (+5.3%). We now expect the full-year growth figure to come in at the upper-end of our forecast or even potentially exceeding it. Increase driven largely by Core Central Region As a breakdown, prices of non-landed private residential properties jumped 5.0% QoQ in Core Central Region (CCR); prices in Outside Central Region (OCR) rose 3.8% while prices in the Rest of Central Region (RCR) increased by 1.1%. We believe the firm CCR price increase was driven largely by City Developments Limited’s (CDL) New Futura and GuocoLand’s Martin Modern. We note that buyer sentiment remains buoyant. CDL announced late last month that The Tapestry project sold 70% of the 450 units released (total: 861 units) over the first weekend of launch (as at 5pm on 25 Mar) at an average selling price of S$1,310 psf. Upcoming launches such as Park Place Residences (second phase) by Lendlease would likely generate keen interest, in our view. Valuations remain compelling for developers The FTSE ST Real Estate Holding & Development Index (FSTREH) is currently trading at a blended forward P/B ratio of 0.67x. We view this as compelling as it comes in at 0.84 standard deviations below the 10-year average (0.80x). Maintain OVERWEIGHT on the Singapore residential sector. Our top picks are City Developments Limited [BUY, FV: S$15.91], UOL Group Limited [BUY, FV: S$10.63] and CapitaLand Limited [BUY, FV: S$4.26]. One potential downside risk could come from further tightening measures introduced by the government if prices continue to gain traction strongly, but this may be mitigated by more supply from upcoming government land sales and re-launches from en-bloc projects. (Wong Teck Ching Andy)

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OCBC Investment Research Market Pulse 3 Apr 2018

Calendar of key events 2-Apr-18

4-Apr-18

5-Apr-18

6-Apr-18

US Mar Manufacturing PMI

US Mar Mortgage Applications

US Mar Initial Jobless Claims

US Mar Change in Nonfarm Payrolls

US Feb Construction Spending

US Feb Factory Orders

US Feb Trade Balance

US Mar Unemployment Rate

CN Mar PMI Manufacturing

US Feb Durable Goods Orders

9-Apr-18

3-Apr-18

SPHREIT 2Q18

10-Apr-18

11-Apr-18

12-Apr-18

13-Apr-18

US Mar PPI Final Demand

US Apr Mortgage Applications

US Apr Initial Jobless Claims

CN Mar Money Supply (10 Apr - 15 Apr)

US Feb Wholesale Inventories

US Mar CPI

US Mar FOMC Meeting Minutes

CN Mar Trade Balance

SPH 2Q18

CN Mar PPI

SG Feb Retail Sales

SG 1Q18 GDP (6 Apr - 13 Apr)

CN Mar CPI

16-Apr-18

17-Apr-18

18-Apr-18

19-Apr-18

20-Apr-18

US Mar Retail Sales Advance

US Mar Industrial Production

US Apr Mortgage Applications

US Apr Initial Jobless Claims

SGX 3Q18

M1 1Q18

CN 1Q18 GDP

KEP 1Q18

CN Mar Retail Sales SG Mar Non-oil Domestic Exports 3311 HK 1Q18

23-Apr-18

24-Apr-18

25-Apr-18

26-Apr-18

27-Apr-18

US Apr Manufacturing PMI

US Mar New Home Sales

MAGIC 4Q18

US Mar Wholesale Inventories

US 1Q18 GDP Annualised

US Mar Exisiting Home Sales

US Mar Durable Goods Orders

SG 1Q18 Unemployment

SG Mar CPI

US Apr Initial Jobless Claims

MINT 4Q18

SG Mar Industrial Production

30-Apr-18

1-May-18

2-May-18

3-May-18

4-May-18

CN Apr Manufacturing PMI

US Apr Manufacturing PMI

US Apr Mortgage Applications

US May FOMC Rate Decision

US Apr Change in Nonfarm Payrolls

SG Mar Money Supply

US Mar Construction Spending

CN Apr Manufacturing PMI

US Apr Initial Jobless Claims

US Apr Unemployment Rate

US Apr ISM Manufacturing

SG Apr Purchasing Managers Index

US Mar Trade Balance US Mar Factory Orders US Mar Durable Goods Orders

Notes:

Sourced from Bloomberg All US Tech results dates have been adjusted to Singapore dates. US Initial jobless claims are released every Friday. MBA mortgage applications are released every Wednesday.

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OCBC Investment Research Market Pulse 3 Apr 2018

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Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Private Limited

Published by OCBC Investment Research Private Limited

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