$BUKIT SEMBAWANG ESTATES LTD(B61.SI)$$CITY DEVELOPMENTS LIMITED(C09.SI)$

CDL, Bukit Sembawang and UOL are analysts' top picks amid brisk March property sales

1. The robust primary sales reported in March poses a double-edged sword for listed developers, say DBS Group Research analysts Derek Tan and Rachel Tan. The pair’s note comes after the property market saw a record quarter in the 1Q2021 with sales of around 3,400 units.

2. The strong transaction volumes, including a record quarter in transaction volumes for resale HDB homes, say the analysts, are positive for property agencies such as APAC Realty. DBS has rated APAC Realty at “buy” with a target price of 61 cents.

3. The developers within the bank’s coverage – City Developments Limited (CDL), UOL and Bukit Sembawang – have seen their unsold inventory levels fall. The analysts have indicated that their preferred picks are CDL and Bukit Sembawang (for mid-caps).

4. To the analysts, the uptrend in property prices in 2021 is led by “cost push” and “demand pull” factors, which Includes pent-up demand from buyers and a hike In construction costs due to higher material and labour costs. The analysts also believe that policy tweaks may be possible as the property price index (PPI) and HDB Indexes rose 5% and 6% over the past six months.

5. Based on current price levels, the OCBC team has indicated that it prefers UOL Group, “given that it has been lowering its inventory risks and has also been seeking to unlock value for shareholders via redevelopment projects”. “UOL’s net gearing ratio of 0.29 times as at Dec 31, 2020, is also at a very healthy level,” it adds. OCBC has rated UOL “buy” with a target price or fair value of $8.91.