STI 2900 remains key resistance despite pro-austerity parties victory in Greece election.

Accumulate China Fishery on attractive valuation and potential earnings turnaround

    Buying focus still on OCR projects

·        Rising supply means price upside capped

·        Prefer diversified or non-residential plays such as Capitaland, CMA and GLP

Concentration on mass appeal.  Primary home sales in May fell 23% m-o-m to 2,057 units. Excluding ECs, transaction volume came in at 1,702 units (-31.8% m-o-m). The overall take up rate dipped to 66% as developers maintained a rapid pace of new launches, offering 30% more volume at 3,114 units. The bulk of the sales continued to be concentrated in the OCR (70%) with the top 3 selling projects - Seahill, FLO Residences and Eight Riversuites - contributing close to 40% of the number of units sold. The CCR saw >100 units sold for the second consecutive month. CDL’s new launch – UP@Robertson Quay - saw 13 units sold between S$1924-2840psf while projects such as Scotts Tower and Twentyone Angullia Park recorded a couple of units changing hands at between S$3,360–4269psf.

Limited price momentum, margins normalising.  Primary sales for the five months have reached 10,867 units, a function of both robust demand and ample supply as developers continue to adopt a quick roll-out strategy. However, whilst volume sales are high, price momentum has moderated with more incentives as a norm in the current new launches. We still hold the view that the increasing supply of public and private housing completions accelerating from 2H12 and over the next two years could drag on price and rental outlook. Hence, developers’ margins are likely to normalise going forward.  

Stock picking strategy. Property stocks are trading at a 37% discount to RNAV of at –1SD to mean level. While valuations have factored in much of the cautious outlook, we remain selective on stock picking strategy. We prefer those with a diversified property segment exposure such as Capitaland and those with lower residential activities and strong market niche like CMA and GLP.

 

This message was edited by stand up n wake up on 18-Jun-2012 @ 11:47 AM