Singapore-listed property counters have been massively sold down in recent weeks.
They are underperforming the benchmark STI, with losses of about 61 per cent year-to-date.
With the outlook for the sector still cloudy, analysts say they would prefer to remain cautious on these property stocks for the year ahead.
Weak new home sales in Singapore have translated into soft earnings, a poor outlook, and falling share prices for residential developers.
For example, Keppel Land, Ho Bee and Wing Tai have seen their share price drop by some 70 to 80 per cent this year.
“The market is concerned that going forward developers will not be able to rake in new sales from the new launches, as well as concerns raised over the possibility of developers writing down their residential land bank,” said an investment analyst at DMG & Partners Securities, Brandon Lee.
CapitaLand and City Developments are now some 60 per cent lower than where they started the year.
And some market-watchers say valuations are looking very attractive.
“A lot of these property counters are actually trading below 1x price-to-book ratio which indicates value. Also they are also trading at substantial discounts to their realisable net asset value. So this is another factor which indicates value in property counters right now,” said an analyst at Fundsupermart.com, Wong Weiyi.
However, Wong notes that the realisable net asset value may get devalued in 2009 due to poor sentiment.
Analysts say they see more downside in the near term for property counters in general, as the world heads into a global recession, depressing sentiment and stalling sales.
Most market analysts tell Channel NewsAsia they would advise caution for investors planning to invest in the sector.
For DMG however, CapitaLand is one counter than stands out.
Lee said: “It has a diversified stream of revenue, not just from residential sector. It also has about S$25 billion worth of private equity funds and five REITs. And these businesses could actually drive in a stable stream of income and mitigate the fall in contribution from the residential space.”
Meanwhile, OCBC Securities has buy recommendations on Keppel Land, UOL and Soilbuild.
Analysts say a recovery in share prices for property counters could only happen toward the end of 2009 or early 2010, on the back of a turnaround in the global economy.
Source : Channel NewsAsia – 4 Dec 2008