Maybank KimEng: Singapore en bloc deals set to goose property market

Singapore one dollar bill

The two latest en bloc deals won’t just boost developers Bukit Sembawang and GuocoLand, they’ll also help catalyse Singapore’s property market, Maybank KimEng said in a note on Monday.

It noted that these two deals brought the 2018 en bloc total to S$5.6 billion from 1,900 units, on top of the 3,400 units that were sold en bloc last year.

“A total of 5,300 households will be on the hunt for replacement homes in the year ahead and will be a key driver of housing sales,” the brokerage said. “This resurgent en bloc will front-load demand and push out supply in the market.”

Bukit Sembawang

It noted that Bukit Sembawang tendered for Katong Park Towers in the East Coast area, just 200 meters from the upcoming Katong Park MRT station.

The S$345 million deal price translates into around S$1,280 per square foot, including the lease upgrading premium, the brokerage said, citing data from Cushman & Wakefield; that compared with nearby projects selling around S$1,400-S$1,500 per square foot, although Katong Park Towers is leasehold, while those were freehold, it noted.

The brokerage was also positive on Bukit Sembawang’s 8 Saint Thomas project, raising its 2019-20 earnings per share (EPS) forecasts by 5 percent after assuming higher average selling prices (ASP) amid “escalating” land prices in the vicinity and strong prices at the prime area new launches.

It raised its target price to S$8.55 from S$8.25, keeping a Buy call.

GuocoLand

Maybank KimEng was also positive on GuocoLand’s en bloc deal to buy Pacific Mansion, taking a 40 percent stake in the project.

“Its latest acquisition has increased its prime residential exposure and should allow the group to ride the improving market sentiment,” the note said.

It cited CBRE data that the deal price of S$980 million translated into a land rate of S$1,806 per square foot, and noted that it was assuming an eventual ASP of S$3,200 per square foot.

“We believe our assumptions are not aggressive, given a strengthening market and S$3,200 per square foot achieved at the recently launched New Futura,” it said.

The brokerage also raised its ASP forecasts for GuocoLand’s Martin Modern project to S$2,700-S$2,750 per square foot from S$2,550-S$2,650, citing brisk sales and higher achieved ASPs.

It raised the stock’s target price to S$3.00 from S$2.95, keeping a Buy call.

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