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Singapore Property - CDL tops two out of three land tenders: Back to familiar hunting grounds

Shared By Stock Fanatic on Wednesday, January 31, 2018 | 31.1.18

■ City Development Limited (CDL) came in top in two out of three government land sales (GLS) sites last evening

■ Number of bidders at each site visibly lower at six to ten bids

■ Bids were most competitive for Handy Road site (District 9) where CDL won by a 12% margin

City Developments (CDL) returned to familiar hunting grounds, toping the tenders for two out of three government land sales sites (GLS) that closed last evening.

CDL placed the top bid of S$212.2m (S$1,722 per square foot per plot ratio (psf ppr) for a plot in Handy Road near Dhoby Ghaut ( District 9), and S$472.4m (c.S$800 psf ppr) for a land parcel in West Coast Vale.

The third site on offer at Tuesday's tender along Chong Kuo Road in the Sembawang/Mandai area, saw a partnership between Lian Soon Holdings and OKP Land placing a top bid of S$43.95m (S$681 psf ppr).

Given that this is a “batched closing” involving 3 sites, we note that developers’ attention was keen at the centrally located Handy Road site with close to 10 bids, while the Chong Kuo site closed with eight bids and the West Coast Vale site drew six bids.

Our thoughts

Handy Road: CDL tops rare District 9 GLS site by 12%
Strong developer interest was expected given the limited availability of centrally located sites in the GLS. CDL’s breakeven is estimated to be close to S$2,250 psf; implying launch prices of close to S$2,500 psf onwards, assuming a 11% profit margin. This will be close to 20% higher than the average transaction price of S$2,000 psf for residential units along the Sophia Road vicinity over the past year.

A proposed estimated 130-unit residential project with an average unit size of 947 square feet (sqft) priced at an average quantum of S$2.4m (S$2,500 psf) would imply a new high in the sub-market. This is however not new for District 9 properties in recent months (Martin Modern was launched at S$2,400psf and recent release of new units are being launched at higher prices). We note that CDL is familiar with the area, formerly launching the 40-unit Wilkie Studios condominium back in 2007 but sales momentum was slow given the uncertainty in the economic environment at that time.

Chong Kuo Road Site: Mid-Sized Developers rule it all!
New (in recent land tenders) land bidders – Lian Soon Holdings & OKP Land JV won the Chong Kuo Road land site at Sembawang for S$44m (S$681 psf ppr). Despite the location being a little further out in OCR (closer to Sembawang Golf Course), the tender garnered strong interest in our view, with 8 bidders and a winning margin of 0.1%. The estimated breakeven is c.S$1,200 psf ppr vs an average price of c.S$1,300 psf for units <100sqm transacted recently around the area. This could be a niche market with little competition in the surrounding area, especially new properties. We note that the bidders for this site were mainly smaller developers.

West Coast Vale: A bullish bid by CDL; Supply build-up in the vicinity a key risk in our view
How much has a year changed? Sentiment towards the West Coast/Clementi areas have improved vastly on the back of the recent en bloc (Park West at S$788 psf ppr) and strong sales seen in launches in the vicinity of the West Coast/Clementi region probably emboldened CDL to make a fairly optimistic bid for the West Coast Vale site, in our view. The S$800 psf ppr bid by CDL is the highest among the three sites sold at West Coat Vale road in recent years. Back in early Feb 2017, China Construction won a tender for a neighbouring site at S$592 psf (35% lower). This development is expected to be launched in 1Q18.

Parc Riviera, a 595-unit condominium built on the first of three West Coast Vale sites by EL Development is 96% sold at an average price of S$1,250 psf, but there was a struggle to sell the units when it was first launched in early 2017.

Technical Analysis
Daily Chart
CDL is not new to the area, with the group developing Hundred Trees Condominium (average launch price of S$900psf) in 2009, which saw robust take-up back then. With estimated breakeven at S$1,300 psf (potential launch price of at least S$1,500psf), a level recently achieved in recent caveats at Clement Canopy and Parc Riviera. However, secondary market transactions in the vicinity are trading at close to S$1,300 psf. The risk in our view is that new residential supply in the vicinity is building up, with close to 2,950 units to be launched meaning that competition will remain strong. This is probably the biggest hurdle for CDL to cross to achieve meaningful sales momentum during launch. (Read Report)

Source : DBS Group Research

Posted on Wednesday, January 31, 2018 | 31.1.18
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