Chip Eng Seng downgraded by DBS after fresh property cooling measures

Singapore two-dollar bills

DBS downgraded Chip Eng Seng to Fully Valued from Buy after the Singapore government imposed a fresh round of property cooling measures.

“With the hike in Additional Buyers’ Stamp Duty (ABSD) rates and tightening of mortgage loan-to-values (LTV), we believe that the combination of these two property curbs could hit buyer sentiment significantly,” DBS said in a note on Friday. “Likewise, given heightened
uncertainty on sell-through rates for Park Colonial which was launched just a week ago, Chip Eng Seng (CES)’s share price is likely to be weak in the immediate term.”

DBS cut its target price to S$0.75 from S$1.18 on lower sales assumptions and construction margins and use a higher discount to revalued net asset value (RNAV) of 65 percent from 45 percent previously.

But DBS noted that it liked the largely uncovered stock on strong earnings visibility and because it could potentially unlock its undervalued hotel portfolio.

It noted that CES’ Park Hotel Alexandra has a recorded book value of around S$210 million, but if sold, could realize value as high as S$376 million.

“While the hotel provides stable recurring cash flow to the group, substantial value could be unlocked, given the robust demand for hotel assets in Singapore,” DBS said.

The stock ended Monday down 0.63 percent at S$0.785.

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