Excerpts from analyst's report

Maybank Kim Eng analyst: Derrick Heng, CFA

Eyes on Value-Unlocking Deals 
With the sector trading at significant discounts to physical assets, we believe that the market may focus on deals that could unlock property values. This will narrow RNAV discounts. Sales of mature commercial properties are the lowhanging fruits, though we also see opportunities in the residential market. Time pressure from looming QC and ABSD deadlines could motivate more developers to pursue bulk sales or structure deals for unsold homes, in our opinion. 

 CityDev. So far, CityDev has monetised SGD2.6b of assets and could unlock another SGD2.4b to achieve its SGD5b AUM target by 2018. It could develop the next deal using the SGD4.5b of investment properties on its books or some high-end projects such as Gramercy Park, 50%-held Nouvel 18 and New Futura, in our view. The last three projects face time pressure from their QC deadlines.

 CapitaLand. CapitaLand has the most established platform for capital recycling. Management continues to reconstitute its portfolio. Last year, the group sold its stakes in PWC Building and Rivervale Mall; it also announced plans to redevelop Funan. We believe further asset divestments or injections into its funds/REITs offer upside to earnings.

A Ho Bee project, Paradise Island features 29 stylish 2-storey villas. Photo: Company Ho Bee. The mismatch between Ho Bee’s stock valuation and its underlying property values continues to offer opportunities, in our view. The company is seeking to sell Rose Court, one of its office assets in the UK. A successful sale should be positive for its stock. Office assets in Singapore and the UK make up 41% and 29% of its GAV respectively.

 Wing Tai. With approaching QC and ABSD deadlines for its residential projects, Wing Tai could try to offload unsold units. QC deadlines for 50%- held Nouvel 18 and Le Nouvel Ardmore are Nov 2016 and April 2016 respectively. The Crest, which is 40% held, remains substantially unsold with 1.5 years to its ABSD deadline in Sep 2017. Wing Tai faces penalties even if one unit of this project is unsold by then. Its recently established fund management platform could provide a conduit to offload these projects, in our view.

Full report here.

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