Property sector outlook – 15% price correction over next
3 years for residential, modest uptick for office & retail
rent
Singapore November NODX down 8.8% y-o-y, worse
than +4.3% expected
*Latest* Singapore’s November NODX fell 8.8% y-o-y, worse
than the +4.3% expected. Electronics exports fell 8.9% y-o-y,
also worse than the +2.8% expected.
US stocks rose as investors watched data to gauge the
outlook for stimulus before a two-day Federal Reserve
meeting that starts later today. In Europe, manufacturing in
the euro area reached a 31-month high in December, led by
Germany, a survey from London-based Markit Economics
showed.
For Singapore’s STI, the technical support is at 3015-3040,
which presents a buying opportunity. This support range sits
just below the -0.5 SD FY14F level of 3043. We believe the
13.1x (-0.5SD) FY14F PE level is attractive, as we are
expecting 9% earnings growth for FY14F. Expect an oversold
rebound to c.3100.
Private home prices in Singapore are expected to finally
decline in 2014, bowing to the weight of the numerous
policy tightening moves on demand and financing, and rising
incoming supply. These will likely drag on rental yields going
forward. We anticipate a 5% correction with a through-thecycle
retracement of 15% over the next three years. Primary
market sales have fallen 32% to 13,637 units for 10M13 and
we project a lower take-up of 13,000- 15,000 in 2014.
In the office segment, we see flat to modest upticks in office
and retail rents, in tandem with GDP growth. As interest rates
are expected to stay low in the near term, we see capital
values holding up, thus lending support to RNAVs.
US Indices Last Close Pts Chg % Chg
Dow Jones 15,884.6 129.2 0.8
S&P 1,786.5 11.2 0.6
NASDAQ 4,029.5 28.5 0.7
Regional Indices
ST Index 3,053.8 (12.3) (0.4)
ST Small Cap 524.8 (0.6) (0.1)
Hang Seng 23,114.7 (131.3) (0.6)
HSCEI 10,932.3 (93.5) (0.8)
HSCCI 4,531.7 (37.9) (0.8)
KLCI 1,837.9 (2.5) (0.1)
SET 1,328.4 (12.7) (0.9)
JCI 4,126.0 (48.9) (1.2)
PCOMP 5,812.5 45.4 0.8
KOSPI 1,961.2 (1.8) (0.1)
TWSE 8,313.9 (63.1) (0.8)
Nikkei 15,152.9 (250.2) (1.6)
STI Index Performance
Singapore
Total Market cap (US$bn) 564
Total Daily Vol (m shrs) 2,135
12m ST Index High 3,454
12m ST Index Low 3,004
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
16 Dec
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.645 0.82
Keppel Corp Buy 10.620 12.90
OCBC Buy 9.810 12.40
Yangzijiang Buy 1.135 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
16 Dec
Target Price
($)
Ezion Holdings Buy 2.210 3.30
China Merchants Buy 0.920 1.20
CSE Global Buy 1.010 1.11
Nam Cheong Buy 0.285 0.42
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
We see developers trading within a trading band of -1SD to
average discount-to-historic mean over the next 12 months.
We anticipate RNAVs to remain relatively flat with dips in
residential prices offset by stable commercial and retail
values. The sector is now trading at a 34% discount to
RNAV, close to the -1SD level and we think downside may
be limited from hereon. Our stock strategy would be
selective, preferring more diversified companies and those
with strong recurrent cash flows. These include UOL, GLP,
Keppel Land and CMA.
Global Logistics Properties has signed a pre-lease agreement
with Qingdao Haier Logistics for 35,000 sqm at GLP Park
Liantang in Shanghai, China. This is the second lease
agreement between the two companies since a strategic
partnership between the two firms was announced in
September last year. In addition to the new facility in
Shanghai, Haier Logistics uses 28,000 sqm at GLP Park
Jiaonan in Qingdao.
Developers sold 1,228 private homes excluding executive
condominium (ECs) in November versus 1,070 units in
October, this according to the Urban Redevelopment
Authority. Including ECs, developers moved 1,714 units in
November, up from October's 1,206.
China’s flash Markit/HSBC PMI for December fell to 50.5
from November's final reading of 50.8. Still, this is the fifth
consecutive month that it remained in expansion territory.
Given the year-end holiday season, the flash PMI covers only
the short period from Dec. 5 to 12. The final PMI will be
released on Jan. 2.
China's policies to encourage improved energy efficiency
and cleaner energy sources will help to slow growth in
global coal demand over the next 5 years, this according to
the International Energy Agency (IEA). The energy agency
said coal demand would grow at an average rate of 2.3% a
year to 2018, compared to last year's forecast of 2.6%
growth to 2017 and actual growth of 3.4% a year between
2007 and 2012.
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