City Developments upgraded to Buy by Daiwa after ‘excessive’ selloff

Singapore two-dollar bills

Daiwa upgraded City Developments to Buy from Outperform, saying the knee-jerk selloff after the Singapore government introduced fresh property cooling measures was “excessive” and “overdone,” creating a “solid buying opportunity.”

“We remain positive on Singapore developers and believe that the cooling measures, as surprising and heavy-handed as they were, only pave the way for a benign longer-term outcome of a gradual multi-year recovery,” Daiwa said in a note dated Monday.

Singapore’s government announced a fresh round of cooling measures for the property market late last week, citing concerns property price rises could be destabilizing later, if allowed to run unchecked. The measures targeted the additional buyer’s stamp duty (ABSD) and loan-to-value limits.

Daiwa said the measures reinforced its expectations that property prices would rise 5-8 percent on-year over 2018-20, with the steps indication the government may even “micromanage” to ensure home prices rise gradually, at around 1-2 percent a quarter.

City Developments may even have an advantage due to the measures, Daiwa said.

“We still believe that CDL, with a Singapore residential pipeline of over 3,000 units available for launch, has a valuable competitive advantage, as the new cooling measures will make it more expensive to acquire land,” it said.

But it cut its earnings per share forecasts for 2018 and 2019 by 10 percent each and its 2020 EPS forecast by 4 percent after lowering average selling price assumptions for some launches and assuming some launch schedules and pace of sales will be delayed by three to six months.

It cut its target price to S$12.10 from S$13.80.

Shares of City Developments were up 1.25 percent at s$9.71 at 2:21 P.M. SGT.

Get Shenton Wire headlines in your inbox

* indicates required