R e g i o n a l

M o r n i n g

N o t e s

Wednesday, 02 April 2014

SECTOR UPDATE

OVERWEIGHT

Property - Singapore

(Maintained)

Price Decline Accelerates The property price decline accelerated to 1.3% qoq from a 0.9% qoq fall in 4Q13 (first yoy drop since 3Q09) as transaction volumes plunged by 53-77% yoy. However, we believe the market has over-discounted the negative prospects, pricing in a 40-50% fall in property prices. We expect property prices to undergo a healthy 5-10% correction in 2014 and prefer deep value and diversified developers. Keppel Land, Ho Bee and Wing Tai are our preferred picks. Maintain OVERWEIGHT. WHAT’S NEW  The Urban Redevelopment Authority’s (URA) latest flash estimates indicate that private home prices fell by 1.3% qoq in 1Q14 following a 0.9% dip in the previous quarter. Housing Development Board (HDB) data shows that public housing prices corrected a further 1.5% qoq, extending from a similar 1.5% qoq decline in 4Q13. ACTION  While the property price decline accelerated to 1.3% qoq from a 0.9% qoq decline in 4Q13, we believe that the market has overdiscounted the negative prospects for the residential sector pricing in a 40-50% fall in property prices. We expect property prices to undergo a healthy 5-10% correction in 2014 and prefer deep value and diversified developers. Keppel Land, Ho Bee and Wing Tai are our preferred picks. ESSENTIALS  First yoy decline in overall property prices since 3Q09 with private home prices falling 0.8% yoy and the qoq price decline accelerating to 1.3% from a 0.9% decline in 4Q13. We anticipate prices to further moderate 5-10% in the year ahead as developers start to trim selling expectations ahead of further price falls. Projects such as The Glades and Hallmark Residences have realised higher sales volumes after trimming prices by 10%, selling a combined 47 units in 2M14, vs 37 units sold in the final two months of 2013 for The Glades and zero sales for Hallmark Residences.  Mid-tier home prices fell the most qoq, down 2.8%, reversing from a 0.4% gain in 4Q13. Prices of mass market homes dipped 0.3% qoq, slowing from a 1.0% decline in 4Q13. Mass market homes continue to be impacted by falling HDB prices that would affect upgrading demand, higher HDB supply targeting first-timers and singles and also the greater availability of supply in the Executive Condominium (EC) segment. The recent launch of The Santorini by MCC Land has seen a slower 13% (80 units sold) take-up of total units compared to February developer launches at Rivertrees Residences and Riverbank @ Fernvale which saw better take-up of 40% of total units.

TOP SECTOR PICKS Company

Rec

Ho Bee Keppel Land Wing Tai

BUY BUY BUY

Target Price (S$) 2.68 4.30 2.50

Share Price (S$) 2.18 3.39 1.835

Source: UOB Kay Hian

PRICE TREND (QOQ) Residential High-End (CCR) Mid (RCR) Mass (OCR) HDB Resale

1Q14 (%)

4Q13 (%)

-1.3 -1.3 -2.8 -0.3 -1.5

-0.9 -2.1 0.4 -1.0 -1.5

1Q14 (%)

2013 (%)

-0.8 -3.8 -3.1 4.8 -3.4

1.1 -1.9 -0.1 6.5 -0.6

Source: URA, HDB

PRICE TREND (YOY)

Residential High-End (CCR) Mid (RCR) Mass (OCR) HDB Resale Source: URA, HDB

ANALYSTS Vikrant Pandey +65 6590 6623 [email protected] Terence Khi +65 6590 6614 [email protected]

 Prices of high-end homes fell 1.3% qoq, and have corrected 3.8%yoy as interest is dampened by the TDSR measures which may be more pronounced for high-end property due to higher absolute quantums and larger unit sizes. In addition to price discounts, developers are adopting more innovative means to realise value such as through bulk sales (eg Newton Imperial) and seeking to lease out vacant units as longstay serviced apartments (eg Twin Peaks).  Transaction volumes for new sales fell 53% yoy to 1,289 units in 2M14, from 2,740 units sold in 2M13. Secondary market sales fell even more sharply in 2M14, by 61% yoy to 594 units for resale transactions, and by 77% yoy to 66 units for sub-sale transactions. PEER COMPARISON Company

Ticker

CapitaLand City Devt GuocoLand Ho Bee Keppel Land OUE Wheelock Wing Tai

CAPL SP CIT SP GUOL SP HOBEE SP KPLD SP OUE SP WP SP WINGT SP

Rec BUY BUY HOLD BUY BUY BUY BUY BUY

Price 1 Apr 14 (S$) 2.91 10.19 2.19 2.18 3.39 2.24 1.66 1.835

Target Price (S$) 3.83 10.84 2.27 2.68 4.30 2.80 2.04 2.50

Upside/ (Downside) to TP (%) 31.7 6.4 3.8 22.9 26.7 25.0 22.9 36.1

Market Cap. (US$m) 9,834.8 7,354.4 2,056.8 1,155.1 4,159.3 1,617.7 1,576.5 1,144.3

Curr PE (x) 17.2 13.8 37.4 18.5 12.1 29.1 18.9 7.7

Fwd PE (x) 15.2 12.1 12.6 17.4 10.5 25.8 14.0 8.8

Curr Yield (%) 2.7 1.6 2.3 1.4 3.8 1.8 3.6 3.3

Fwd Yield (%) 2.7 1.6 1.0 1.4 4.1 1.8 3.6 3.3

Book Price/ NAV ps Book (S$) (x) 3.78 0.77 8.63 1.18 2.12 1.03 3.48 0.63 4.52 0.75 3.18 0.70 2.51 0.66 3.53 0.52

RNAV ps (S$) 5.11 13.55 3.03 3.58 5.37 4.34 2.92 3.33

ROE (%) 4.9 8.9 7.3 3.6 6.6 2.8 4.5 6.4

Net Gearing * (%) 34.4 19.9 155.2 15.0 38.1 57.2 5.8 16.0

* Net Gearing: Net Debt to Equity * REITs: Net Debt to Total Assets Source: Bloomberg, UOB Kay Hian

Refer to last page for important disclosures.

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R e g i o n a l

M o r n i n g

N o t e s

Wednesday, 02 April 2014

 Buying interest remains driven by Singaporeans, who accounted for the bulk 76% of total units purchased in 1Q14. PRs’ and foreigners’ share remained largely unchanged at 16% and 7% of total home-buyers respectively. PROPERTY PRICE INDICES (PRIVATE VS. PUBLIC)

PRIVATE PROPERTY PRICE INDEX BY SEGMENT

Source: URA, UOB Kay Hian

Source: URA, UOB Kay Hian

PROFILE OF BUYERS (1Q14)

NUS-SRPI PROPERTY INDEX (MONTHLY)

Source: URA, UOB Kay Hian

Source: NUS

VOLUME OF SALES (NEW SALE, SUB-SALE AND RESALE)

MEDIAN PRICES OF UNITS SOLD (PSF) 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1

Source: URA, UOB Kay Hian

Refer to last page for important disclosures.

New Sale 1,306 1,271 1,344 1,292 1,249 1,185 1,108 1,138 1,180 1,168 1,234 1,270 1,327 1,450 1,399 1,207

Resale 927 974 999 1,060 1,083 1,117 1,148 1,068 1,154 1,197 1,275 1,147 1,166 1,183 1,168 1,124

Sub Sale 1,338 1,363 1,370 1,340 1,335 1,337 1,362 1,246 1,310 1,359 1,374 1,334 1,350 1,522 1,403 1,331

Total 1,084 1,082 1,141 1,151 1,152 1,158 1,146 1,110 1,175 1,197 1,264 1,241 1,300 1,400 1,359 1,193

Source: URA, UOB Kay Hian

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R e g i o n a l

M o r n i n g

N o t e s

Wednesday, 02 April 2014

Disclosures As of 02 April 2014, the analyst and his/her immediate family do not hold positions in the respective securities recommended in this report. We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to change without notice. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of the addressee only and is not to be taken as substitution for the exercise of judgement by the addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. UOB Kay Hian and its affiliates, their Directors, officers and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add to or dispose of any such securities. UOB Kay Hian and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discussed herein (or investments related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. UOB Kay Hian (U.K.) Limited, a UOB Kay Hian subsidiary which distributes UOB Kay Hian research for only institutional clients, is an authorised person in the meaning of the Financial Services and Markets Act 2000 and is regulated by Financial Services Authority (FSA). In the United States of America, this research report is being distributed by UOB Kay Hian (U.S.) Inc (“UOBKHUS”) which accepts responsibility for the contents. UOBKHUS is a broker-dealer registered with the U.S. Securities and Exchange Commission and is an affiliate company of UOBKH. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact UOBKHUS, not its affiliate. The information herein has been obtained from, and any opinions herein are based upon sources believed reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates herein reflect our judgement on the date of this report and are subject to change without notice. This report is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. From time to time, the firm preparing this report or its affiliates or the principals or employees of such firm or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or other securities of such issuers and may make a market or otherwise act as principal In transactions in any of these securities. Any such non-U.S. persons may have purchased securities referred to herein for their own account in advance of release of this report. Further information on the securities referred to herein may be obtained from UOBKHUS upon request. http://research.uobkayhian.com MCI (P) 116/03/2014 RCB Regn. No. 198700235E

Refer to last page for important disclosures.

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